The acid-test ratio:
A) Is also called the quick ratio.
B) Measures profitability.
C) Measures inventory turnover.
D) Is generally greater than the current ratio.
E) Measures return on assets.

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, measures a company's ability to cover its current liabilities with its most liquid assets. It excludes inventory from the calculation, making it a more stringent measure of a company's short-term liquidity than the current ratio. Therefore, the best choice is A.

The Acid-Test Ratio