A measure of the ability of an entity to pay all of its current liabilities if they came due immediately is the:
A)debt ratio.
B)quick ratio.
C)liquidity ratio.
D)accounts receivable turnover.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, measures the ability of an entity to pay all of its current liabilities using only its most liquid assets (such as cash and accounts receivable) if they came due immediately. It is a more conservative measure of liquidity than the current ratio, which includes all current assets. A higher quick ratio indicates a more liquid entity, able to meet its current obligations without having to rely on the sale of inventory or the collection of long-term receivables.

A Measure of the Ability of an Entity to Pay