Which of the following ratios is calculated to determine the liquidity of a firm?
A) Inventory turnover ratio
B) Quick ratio
C) Total assets turnover ratio
D) Debt ratio
E) Net profit ratio

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, is calculated by dividing the sum of a firm's cash, marketable securities, and accounts receivable by its current liabilities. This ratio primarily focuses on a firm's ability to pay off its short-term obligations with its most liquid assets, making it a key measure of liquidity. The other ratios listed may provide insights into a firm's overall financial health, but they are not specifically designed to measure liquidity.

Which of the Following Ratios Is Calculated to Determine the Liquidity