The _____ is a more stringent measure of a business's liquidity.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, is a more stringent measure of a business's liquidity as it only considers assets that can be immediately converted to cash (such as cash on hand, marketable securities, and accounts receivable) and excludes inventory and prepaid expenses. This means that it provides a more accurate picture of a company's ability to pay its short-term liabilities. The current ratio (A) is a more general measure of liquidity that considers all current assets, including inventory and prepaid expenses. The turnover ratio (B) and receivables collection ratio (D) are measures of efficiency rather than liquidity.

The _____ Is a More Stringent Measure of a Business's