The quick (acid test) ratio reflects:
A) the same information as the debt ratio.
B) the relationship of quick assets to fixed assets.
C) management's reaction time to avoid losses.
D) the belief that not all current assets can be liquidated immediately.

Question

Quizplus · Accepted Answer

The quick (acid test) ratio is a measure of the ability of a company to pay off its current liabilities with only its most liquid assets, excluding inventory. This ratio acknowledges the fact that not all current assets can be quickly turned into cash without significant loss in value. Therefore, the best choice is D, which states, "the belief that not all current assets can be liquidated immediately."

The Quick (Acid Test) Ratio Reflects