Final answer:
The quick ratio is the most stringent liquidity ratio because it eliminates inventory in its measurement. Therefore, the correct option is E.
Step-by-step explanation:
The liquidity ratio that is considered to be the most stringent because it eliminates inventory in its measurement is E. Quick ratio.
The quick ratio, also known as the acid-test ratio, focuses on a company's ability to pay off its immediate liabilities using its most liquid assets. It excludes inventory because inventory may not be easily converted to cash in the short term.
For example, if a company has a quick ratio of 1.5, it means it has $1.50 in highly liquid assets (cash, marketable securities, accounts receivable) for every $1 of current liabilities. This ratio provides a more conservative measure of a company's liquidity position compared to other ratios.