A Ratio That Measures the Instant Debt-Paying Ability of a Company

question 104

Multiple Choice

A ratio that measures the instant debt-paying ability of a company is called:

• A) acid-test ratio
• B) Liquidity ratio
• C) debit ratio
• D) credit ratio

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Definitions:

Warranty Expense

Costs incurred by a company to repair, replace, or service products due to manufacturing defects or failures during the warranty period.

Repairs

Expenditures to restore an asset to its former condition or to keep it in operable condition without increasing its life or value significantly.

Warranty Expense

Costs a company anticipates or incurs for the repair or replacement of defective products during the warranty period.

Repairs

Expenses incurred to restore an asset to a condition where it can perform its intended function, without improving beyond its original state.