The acid-test (quick) ratio
A) is used to quickly determine a company's solvency and long-term debt paying ability.
B) relates cash, short-term investments, and net receivables to current liabilities.
C) is calculated by taking one item from the income statement and one item from the statement of financial position.
D) is the same as the current ratio except it is rounded to the nearest whole percent.

Question

Quizplus · Accepted Answer

The acid-test or quick ratio relates liquid assets (cash, short-term investments, and net receivables) to current liabilities, providing a quick measure of a company's ability to meet short-term obligations. It does not take into account long-term debt or solvency. It is calculated by dividing the sum of cash, short-term investments, and net receivables by current liabilities.

The Acid-Test (Quick) Ratio