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)Debt to Equity ratio.

Question

Quizplus · Accepted Answer

The acid-test, also known as quick ratio, is a more stringent measure of liquidity than the current ratio as it includes only the most liquid current assets (such as cash, marketable securities, and accounts receivable) in relation to current liabilities. This measure provides a clearer picture of a company's ability to meet its short-term obligations. The other answer choices are not measures of liquidity.

A More Stringent Measure of Liquidity Than the Current Ratio