Quick assets divided by current liabilities is the:
A) Acid-test ratio.
B) Current ratio.
C) Working capital ratio.
D) Current liability turnover ratio.
E) Quick asset turnover ratio.

Question

Quizplus · Accepted Answer

Quick assets (cash, marketable securities, and accounts receivables) are highly liquid assets that can easily be turned into cash to cover current liabilities. The ratio of quick assets to current liabilities is known as the acid-test ratio, also known as the quick ratio. This ratio provides a more conservative measure of a company's ability to meet its short-term obligations than the current ratio because it excludes inventory and prepaid expenses, which may not be easily liquidated.

Quick Assets Divided by Current Liabilities Is The