Which of the following ratios is considered a measure of a company's ability to pay current liabilities?
A) price/earnings ratio
B) acid-test ratio
C) debt ratio
D) times-interest-earned ratio

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, is a measure of a company's ability to pay its current liabilities. It includes only the most liquid assets (cash, accounts receivable, and marketable securities) in its calculation, excluding inventories and prepaid expenses that may take longer to convert to cash. The other ratios listed are not specific measures of a company's ability to pay current liabilities.

Which of the Following Ratios Is Considered a Measure of a Company's