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

Question

Quizplus · Accepted Answer

Dividing quick assets (assets that can be easily converted into cash) by current liabilities gives us the acid-test ratio, also known as the quick ratio. This ratio measures a company's ability to pay off its current liabilities with its most liquid assets. The current ratio (A) is calculated by dividing current assets by current liabilities and includes all current assets, not just the most liquid ones. Return on investment (B) is a measure of profitability, not liquidity. The ratio of liabilities to stockholders' equity (D) is a measure of a company's leverage, not its liquidity.

Dividing Quick Assets by Current Liabilities Is the Calculation for the