Because the assets included in the current ratio have different levels of liquidity that reflect different degrees of collectability, many companies use which of the following ratios to measure current liquidity?
A)Current ratio
B)Acid-test
C)Working capital
D)Return on equity

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, excludes inventory and other less liquid assets from the calculation, providing a more accurate measure of a company's ability to meet its short-term obligations. Choice A (current ratio) and choice C (working capital) both include all current assets, regardless of their level of liquidity, which can result in an overestimation of a company's ability to pay its debts. Choice D (return on equity) measures profitability, not liquidity.

Because the Assets Included in the Current Ratio Have Different