A more stringent measure of liquidity than the current ratio is referred to as
A)Current asset turnover.
B)Acid-test.
C)Collectability test.
D)None of these ans choices are correct.

Question

Quizplus · Accepted Answer

The more stringent measure of liquidity than the current ratio is referred to as the acid-test, also known as the quick ratio. The acid-test is a more conservative measure of liquidity because it only includes the most liquid assets, such as cash, marketable securities, and accounts receivable, in the numerator of the ratio. It excludes inventory and prepaid expenses because these assets may not be easily converted into cash in the short term.

A More Stringent Measure of Liquidity Than the Current Ratio