Which one of the following statements is correct? The quick (or acid test) ratio is the ratio of:
A)Current assets to current liabilities.
B)Current assets less inventory to current liabilities less bank overdraft.
C)Current assets less cash to current liabilities less bank overdraft.
D)Current assets less inventory to current liabilities.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid test ratio, is calculated by subtracting inventory from current assets and then dividing by current liabilities. This ratio measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory since it is not as readily convertible to cash.

Which One of the Following Statements Is Correct? the Quick