Which of the following describes the key significance of the acid ratio?
A)It reflects how much long-term debt a company has.
B)It measures a company's ability to pay its current liabilities by using its current assets.
C)It indicates how much cash could be realised by selling off all the inventory.
D)It measures the profitability of a company.

Question

Quizplus · Accepted Answer

The acid ratio, also known as the quick ratio, is a liquidity ratio that measures a company's ability to pay its short-term liabilities using its most liquid assets (cash, marketable securities, accounts receivable). It is a key indicator of a company's short-term financial health and ability to meet its obligations.

Which of the Following Describes the Key Significance of the Acid