Which of the following ratios is also known as acid test?
A) current ratio
B) debt ratio
C) asset turnover ratio
D) inventory turnover ratio
E) quick ratio

Question

Quizplus · Accepted Answer

The quick ratio is also known as acid test because it measures a company's ability to use its most liquid assets (such as cash and accounts receivable) to pay off its current liabilities immediately, without relying on the sale of inventory. This ratio provides a more conservative view of a company's financial health compared to the current ratio, which includes inventory in its calculation.

Which of the Following Ratios Is Also Known as Acid