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)Debt ratio.

Question

Quizplus · Accepted Answer

The quick ratio (also known as acid-test ratio) is calculated by subtracting inventories (which are less liquid) from current assets and dividing by current liabilities. This ratio provides a more accurate picture of a company's liquidity by excluding inventories, which may not be easily converted into cash. Therefore, the quick ratio is a better measure of a company's ability to pay its short-term obligations.

Because the Assets Included in the Current Ratio Have Different