Because the assets included in the current ratio have different levels of liquidity that reflect different degrees of collectability,many companies use which of the following ratios to measure current liquidity?
A)Current ratio.
B)Working capital.
C)Quick ratio.
D)None of these ans choices are correct.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term liabilities with its most liquid assets. It excludes inventory, which may not be easily converted to cash, and therefore provides a more conservative measure of a company's liquidity compared to the current ratio. As such, it is a more appropriate ratio to use when the liquidity of a company's inventory is uncertain or when a business has a slow inventory turnover. Working capital is not a ratio, but rather an absolute dollar amount that represents current assets minus current liabilities. The current ratio is a more general measure of liquidity that includes all current assets, regardless of their liquidity.

Because the Assets Included in the Current Ratio Have Different