Dividing quick assets by total current liabilities is the calculation for the
A) current ratio.
B) return on investment.
C) quick or acid-test ratio.
D) ratio of liabilities to owner's equity.

Question

Quizplus · Accepted Answer

Dividing quick assets (cash, marketable securities, and accounts receivable) by total current liabilities gives the quick or acid-test ratio. This ratio measures a company's ability to pay off its current liabilities using only its most liquid assets. It is similar to the current ratio (choice A), but excludes inventory as a component of current assets. Return on investment (choice B) and ratio of liabilities to owner's equity (choice D) are unrelated to this calculation.

Dividing Quick Assets by Total Current Liabilities Is the Calculation