Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?
A)The current ratio will always be equal to or larger than the acid-test ratio for a specific company.
B)The acid-test ratio will always be equal to or larger than the current ratio for a specific company.
C)Either the current ratio or the acid-test ratio could be larger for a specific company.

Question

Quizplus · Accepted Answer

The current ratio includes all current assets in its calculation, while the acid-test ratio (also known as the quick ratio) excludes inventory and other less liquid current assets. Therefore, since the acid-test ratio uses a subset of the current assets used in the current ratio, the current ratio will always be equal to or larger than the acid-test ratio.

Which of the Following Is True Regarding the Relationship Between