What does the acid test ratio eliminate from its calculation, because it is considered the least liquid of the current assets?
A)Bank bills
B)Accounts receivable
C)Government securities
D)Inventory

Question

Quizplus · Accepted Answer

The acid test ratio, also known as the quick ratio, measures a company's ability to meet short-term obligations with its most liquid assets. As such, it eliminates inventory from the calculation since it is considered the least liquid of the current assets. Bank bills, accounts receivable, and government securities are all considered more liquid than inventory and are included in the calculation.

What Does the Acid Test Ratio Eliminate from Its Calculation