The Acid-Test Ratio Is a More Stringent Measure of Liquidity

question 7

True/False

The acid-test ratio is a more stringent measure of liquidity than the cash ratio.

---

Definitions:

Par Preferred Stock

Preferred shares of a company's stock issued at a specific nominal value and with fixed dividend payments.

Cash

Liquid funds available for transaction or investment purposes.

Treasury Stock

Shares that were issued and later reacquired by the issuing corporation, which do not confer voting rights or pay dividends.

Purchase Price

The amount of money paid to buy a good, service, or asset. It encompasses all forms of considerations including cash, assets, assumed liabilities, and other financial terms involved in a transaction.