59.9k views
0 votes
The acid-test ratio is based on a more conservative measure than the current ratio of the company's ability to:

Click the answer you think is right.
a. stay profitable
b. pay its current liabilities
c. earn a high return
d. turn over its assets

User Tadhg
by
7.9k points

1 Answer

6 votes

Final answer:

The acid-test ratio measures a company's ability to pay its current liabilities using its most liquid assets. It is a more conservative measure than the current ratio.

option b is the correct

Step-by-step explanation:

The acid-test ratio, also known as the quick ratio, is a financial metric that measures a company's ability to pay its current liabilities using its most liquid assets. This ratio is considered to be a more conservative measure than the current ratio because it excludes inventory from the calculation.

The acid-test ratio is calculated by dividing a company's cash, marketable securities, and accounts receivable by its current liabilities.

By focusing on highly liquid assets, the acid-test ratio provides a clearer picture of a company's short-term liquidity and its ability to meet its immediate financial obligations.

User Ashot Karakhanyan
by
7.5k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.