Which of the following is TRUE of the acid-test ratio?
A) It measures a company's ability to pay its current liabilities.
B) It measures the ability of the company to earn net income.
C) It measures a company's ability to meet its short-term obligations with cash and cash equivalents.
D) It indicates how much cash could be realized by selling the inventory.

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, measures a company's ability to pay its current liabilities using its most liquid assets, excluding inventory.

Which of the Following Is TRUE of the Acid-Test Ratio