The acid-test (quick) ratio A. relates cash, short-term investments, and net receivables to current liabilities. B. is calculated by taking one item from the income statement and one item from the balance sheet. C. is used to quickly determine a company's solvency and long-term debt paying ability. D. is the same as the current ratio except it is rounded to the nearest whole percent.

Question

Jairo Zuniga

Business

11 June, 05:29

The acid-test (quick) ratio A. relates cash, short-term investments, and net receivables to current liabilities. B. is calculated by taking one item from the income statement and one item from the balance sheet. C. is used to quickly determine a company's solvency and long-term debt paying ability. D. is the same as the current ratio except it is rounded to the nearest whole percent.

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Answers (1)

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Alan Ponce · Answer 1

The correct answer is letter "A": relates cash, short-term investments, and net receivables to current liabilities.

Explanation:

The Quick Ratio measures a business's more liquid assets in relation to its short-term obligations. Also called the Acid-Test Ratio, it is calculated by adding the company's cash and equivalents with its short-term investments and its accounts receivables. That result is divided by the firm's current liabilities and the final figure will be the Quick Ratio.