Which of the following ratios is a measure of the company's ability to pay its current liabilities once inventory is subtracted from current assets?

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, is calculated by dividing a company's current assets minus inventory by its current liabilities. This ratio provides an indication of the company's ability to pay off its current liabilities without relying on the sale of inventory, which may not be easily sold or may be sold at a lower price. Therefore, option A is the correct choice. The net margin ratio and profitability ratio are measures of profitability, while the inventory ratio measures the efficiency of inventory management.

Which of the Following Ratios Is a Measure of the Company's