The Acid-Test Ratio

question 42

Multiple Choice

The acid-test ratio

• A) is a quick calculation of an approximation of the current ratio.
• B) does not include all current liabilities in the calculation.
• C) does not include inventory as part of the numerator.
• D) does include prepaid expenses as part of the numerator.

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Definitions:

Stocks

Financial instruments representing ownership in a company or corporation, offering a claim to part of the corporation's assets and profits.

Equity Securities

Financial instruments representing ownership in a company, such as stocks, which give shareholders voting rights and potential dividends.

Ownership

The state or fact of legal possession and control over property, which can include goods, land, or intellectual property.

Third Party

An entity or individual that is not directly involved in a transaction or agreement but may be affected by it or have an interest in it.