An Acid-Test Ratio of 1

question 190

True/False

An acid-test ratio of 1.0 is considered safer than a ratio of 0.50.

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Definitions:

Operating Expenses

Costs related to the operation of a business, excluding the cost of goods sold, financing costs, and taxes.

Net Sales

The total income generated from sales by a firm, after reducing it for returns, discounts, and allowances due to damaged or absent goods.

Inventory Turnover

A proportion indicating the frequency at which a company's stock is sold and replenished during a given timeframe.

Gross Profit Rate

A financial metric that indicates the percentage of revenue that exceeds the cost of goods sold, reflecting a company's operational efficiency.