Which of the ratios listed helps to indicate whether current liabilities could be paid without having to sell the inventory?
A) current ratio
B) profit margin
C) quick ratio
D) return on assets

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid test ratio, is a liquidity ratio that measures a company's ability to pay off its current liabilities with its quick assets (assets that can easily be converted to cash) without having to sell its inventory. Therefore, the quick ratio is the best choice in this scenario. The current ratio (A) measures a company's ability to pay off its current liabilities with all its current assets, including inventory, and does not take into account the time it takes to sell inventory. The profit margin (B) and return on assets (D) are profitability ratios and do not give an indication of a company's ability to pay off its current liabilities without having to sell inventory.

Which of the Ratios Listed Helps to Indicate Whether Current