Which of the following ratios is a measure of a company's ability to pay all current liabilities if they become due immediately?
A)The acid-test ratio
B)The inventory turnover ratio
C)The times-interest-earned ratio
D)The debt ratio

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, is a measure of a company's ability to pay all current liabilities if they become due immediately, without relying on the sale of inventory. It is calculated by dividing the sum of cash, marketable securities, and accounts receivable by the current liabilities. The other ratios listed are not specifically designed to measure a company's ability to pay its current liabilities immediately.

Which of the Following Ratios Is a Measure of a Company's