The Acid-Test Ratio

question 2

Multiple Choice

The acid-test ratio:

• A) Is also called the quick ratio.
• B) Measures profitability.
• C) Measures inventory turnover.
• D) Is generally greater than the current ratio.
• E) Measures return on assets.

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Definitions:

Depreciable Asset

An asset that loses value over time due to wear and tear, age, or obsolescence, and for which depreciation can be accounted for tax and accounting purposes.

Useful Life

The estimated time period that an asset is expected to be usable for the purpose for which it was acquired.

Consolidation

The process of combining financial statements from different entities within a single corporate group, treating them as a single entity.