The acid test ratio is a more rigorous test of the short-term liquidity of the venture as it eliminates inventory,which is the least liquid current asset.

Question

Quizplus · Accepted Answer

The statement is true. The acid test ratio, also known as the quick ratio, only includes highly liquid assets such as cash, marketable securities, and accounts receivable while excluding inventory. This provides a more accurate picture of the venture's ability to meet its short-term financial obligations.

The Acid Test Ratio Is a More Rigorous Test of the Short-Term