Which type of 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 firm's ability to pay off short-term obligations without relying on inventory sales. It is calculated by subtracting inventory from current assets and dividing the result by current liabilities. This ratio is more conservative than the current ratio as it excludes inventory, which is the least liquid current asset. A higher quick ratio indicates a better ability to meet short-term obligations.

Which Type of Ratio Measures a Firm's Ability to Pay