Which of the following ratios is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio?

Question

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The acid-test ratio, also known as the quick ratio, is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio because it excludes inventory from current assets. This ratio only considers cash, marketable securities, and accounts receivable as liquid assets and measures whether a company can meet its short-term liabilities without relying on inventory sales. The debt ratio and equity ratio measure a company's leverage, while days' sales in receivables measures the average time it takes for a company to collect its accounts receivable.

Which of the Following Ratios Is Considered to Be a More