A problem with the current and acid test ratios is that,although they provide information about liquidity,they do not
A)Indicate the dollar amounts of the differences.
B)Indicate the underlying quality of the current assets.
C)Include all the current assets.
D)Include all the liabilities.

Question

Quizplus · Accepted Answer

The current and acid test ratios only provide information about liquidity, but do not indicate the underlying quality of the current assets. This means that a company with high current and acid test ratios may still face difficulties in paying off its current liabilities if its current assets are low quality or difficult to convert into cash quickly. Hence, the ratios do not provide a complete picture of a company's liquidity position.

A Problem with the Current and Acid Test Ratios Is