Which Ratio Measures the Ability of a Company to Pay

question 11

Multiple Choice

Which ratio measures the ability of a company to pay all current liabilities if they came due immediately?

• A)Inventory turnover ratio
• B)Current ratio
• C)Acid-test ratio
• D)Day's sales in receivables

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Definitions:

Payment

The transfer of money, goods, or services from one party to another in exchange for something of value, completing a transaction.

Debtor's Obligations

The responsibilities or duties a borrower must fulfill, such as repaying borrowed money, according to agreed-upon terms.

Chapter 7 Proceeding

A bankruptcy process providing for the liquidation of a debtor's non-exempt assets to pay off creditors.

Discharge

The completion, termination, or annulment of a legal duty or obligation, such as the payment of a debt or the performance of a contract.