To analyze his firm's health, the CEO of Epixore Software tries to determine how quickly the firm's current assets can be turned into cash to cover short-term liabilities.He then subtracts the firm's inventory from the list of current assets to determine if the remaining assets alone could cover short-term liabilities.In the context of ratio analysis, the CEO of Epixore Software is trying to determine his firm's ________ ratio.

Question

Quizplus · Accepted Answer

The CEO of Epixore Software is trying to determine his firm's liquidity ratio, which measures the ability of the firm to meet its short-term obligations by assessing the availability of liquid assets to cover current liabilities. Subtracting inventory from current assets is a common calculation in determining the firm's quick or acid test ratio, a type of liquidity ratio that excludes inventory from current assets.

To Analyze His Firm's Health, the CEO of Epixore Software