The most common analytical procedure to assess liquidity is the:
A) debt to equity ratio.
B) net profit margin.
C) inventory turnover ratio.
D) quick ratio.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid test ratio, is the most common analytical procedure to assess liquidity. It measures a company's ability to pay its current liabilities with its most liquid assets. The formula for the quick ratio is (Current assets - Inventory - Prepaid expenses) / Current liabilities. A higher quick ratio indicates a greater ability to cover short-term obligations.

The Most Common Analytical Procedure to Assess Liquidity Is The