This ratio measures a firm's ability to pay off short-term obligations without relying on inventory sales.
A) cash
B) current
C) internal-growth
D) quick or acid test

Question

Quizplus · Accepted Answer

The quick or acid test ratio measures a company's ability to pay off short-term liabilities using only its most liquid assets, such as cash, marketable securities, and accounts receivable. It excludes inventory from the equation, as inventory can be more difficult to convert to cash quickly in times of financial strain. A higher quick ratio indicates a more financially stable company with the ability to meet its short-term obligations without relying on inventory sales.

This Ratio Measures a Firm's Ability to Pay Off Short-Term