Which of the Following Is the Key Significance of the Acid-Test

question 20

Multiple Choice

Which of the following is the key significance of the acid-test ratio?

• A)It measures a company's ability to pay its current liabilities if they are due immediately.
• B)It measures the ability of the company to earn profits out of the sales made by it.
• C)It reflects how much long-term debt a company has.
• D)It indicates how much cash could be realized by selling the inventory.

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Definitions:

Banks

Financial institutions licensed to receive deposits and make loans, offering various other financial services such as wealth management, currency exchange, and safe deposit boxes.

Insurance Companies

Organizations that provide financial coverage for losses in exchange for premiums.

Return-of-Service Form

A document that is used to certify the delivery of legal documents to a party involved in court proceedings.

Affidavit

A written statement made under oath, used as evidence in court.