Which of These Ratios Is Not Directly Relevant to the Evaluation

question 48

Multiple Choice

Which of these ratios is not directly relevant to the evaluation of a company's short-term liquidity position?

• A)Operating profit ratio.
• B)Current ratio.
• C)Quick ratio.
• D)Acid test ratio.

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales, such as rent, insurance, and salaries.

Net Operating Income

Income derived from the main activities of a business, not including interest and tax deductions.

Variable Expenses

Costs that change in proportion to the activity of a business, such as raw materials and direct labor costs.

Fixed Expenses

Costs that do not change with the level of production or sales over a short period, such as rent or salaries.