The ratios that are used to determine a company's short-term debt paying ability are
A) asset turnover times interest earned current ratio and accounts receivable turnover.
B) times interest earned inventory turnover current ratio and accounts receivable turnover.
C) times interest earned acid-test ratio current ratio and inventory turnover.
D) current ratio acid-test ratio accounts receivable turnover and inventory turnover.

Question

Quizplus · Accepted Answer

The ratios commonly used to measure a company's short-term debt paying ability include its current ratio (ability to pay off short-term liabilities with current assets), acid-test ratio (ability to pay off short-term liabilities with quick assets, which are current assets minus inventory), accounts receivable turnover (how quickly the company collects payments from customers), and inventory turnover (how quickly the company sells its inventory). Option D is the only answer that includes all of these ratios.

The Ratios That Are Used to Determine a Company's Short-Term