Which of the Following Statements About the Acid-Test Ratio Is

question 105

Multiple Choice

Which of the following statements about the acid-test ratio is TRUE?

• A) The acid-test ratio measures profitability.
• B) Prepaids are included when computing the acid-test ratio.
• C) The lower the acid-test ratio is the better able a company is to pay its current liabilities.
• D) An acid-test ratio of 0.90 to 1.00 is considered good in most industries.

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Definitions:

Credibility

The quality of being trusted and believed in, often considered essential for individuals, businesses, and institutions in maintaining public confidence.

Business Planning

The process of creating a detailed plan on how a business will achieve its goals and objectives. It includes strategy development, resource allocation, and financial forecasting.

Strategic Planning

A process for defining a company's direction and making decisions on allocating its resources to pursue this strategy, including its capital and people.

Operational Planning

The process of planning short-term actions and strategies to achieve goals and objectives set by strategic planning.