The acid-test ratio is a more accurate measure of a company's liquidity than the current ratio.

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, only includes the most liquid assets of a company, such as cash and accounts receivable. This provides a better reflection of a company's ability to pay its short-term obligations than the current ratio, which includes all current assets. Therefore, the acid-test ratio is a more accurate measure of a company's liquidity than the current ratio.

The Acid-Test Ratio Is a More Accurate Measure of a Company's