What does the acid test ratio eliminate from its calculation, because it is considered the least liquid of the current assets?
A)bank bills
B)accounts receivable
C)government securities
D)inventory

Question

Quizplus · Accepted Answer

The acid test ratio, also known as the quick ratio, eliminates inventory from its calculation because it is considered the least liquid of the current assets. The ratio is used to measure a company's ability to use its most liquid assets to pay off its current liabilities without needing to sell inventory or other less liquid assets. Bank bills, accounts receivable, and government securities are all considered more liquid than inventory and are included in the calculation of the acid test ratio.

What Does the Acid Test Ratio Eliminate from Its Calculation