While the current and acid-test ratios provide information about liquidity, they do not indicate the underlying quality of current assets.

Question

Quizplus · Accepted Answer

The current and acid-test ratios only reveal the ability of a company to meet its short-term obligations, but they do not distinguish between high-quality and low-quality current assets. Quality of current assets can include factors such as marketability, collectability, and vulnerability to obsolescence.

While the Current and Acid-Test Ratios Provide Information About Liquidity