Which one of these ratios is commonly referred to as the acid-test ratio?
A) Times interest earned ratio
B) Quick ratio
C) Cash coverage ratio
D) Cash ratio

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, is a measure of a company's ability to meet short-term liabilities with its most liquid assets. It excludes inventory from current assets, as inventory may not be easily convertible to cash in the short-term. The quick ratio is a more stringent measure of liquidity compared to the current ratio, making it a commonly used ratio for assessing a company's short-term solvency.

Which One of These Ratios Is Commonly Referred to as the Acid-Test