When is the acid test an especially important test for a company's liquidity?
A)when the economy is slow and inventory is not selling
B)when the economy is robust and inventory is selling fast
C)with companies that exclusively sell services and therefore do not have any inventory
D)with companies that exclusively sell services to the wealthy and therefore are not subject to economic downturns

Question

Quizplus · Accepted Answer

The acid test is an especially important test for a company's liquidity when the economy is slow and inventory is not selling. This is because the acid test measures a company's ability to pay off its short-term debts without relying on inventory that may not be selling well in a slow economy.

When Is the Acid Test an Especially Important Test for a Company's