The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

Name: The acid-test ratio emphasizes the ability to convert inventory quickly into cash.
Brand: Quizplus
Rating: 4.8 (31 reviews)

Question

Quizplus · Accepted Answer

Inventory is not included as a highly liquid asset in the acid-test ratio. Thus, the acid-test ratio is actually a better measure of liquidity than the current ratio for firms that are likely to have difficulty converting inventory into cash.

The Acid-Test Ratio Emphasizes the Ability to Convert Inventory Quickly