Which of the following is the strictest test of a company's liquidity?

Question

Quizplus · Accepted Answer

The Quick ratio is the strictest test of a company's liquidity because it only includes the most liquid assets, such as cash and accounts receivable, to pay off current liabilities. It excludes inventory, which may take longer to convert to cash, making it a more conservative measure than the current ratio. Debt-to-equity and cash from operations are measures of a company's financial leverage and cash flow, respectively, but they do not solely focus on liquidity.

Which of the Following Is the Strictest Test of a Company's