Which of the Following Is True of the Acid-Test Ratio

question 132

Multiple Choice

Which of the following is true of the acid-test ratio?

• A)It measures a company's ability to pay its current liabilities.
• B)It measures the ability of the company to earn net income.
• C)It measures a company's ability to meet its short-term obligations with cash and cash equivalents.
• D)It indicates how much cash could be realized by selling the inventory.

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Definitions:

Autarky Price

The price of a good in a country when it is closed to international trade, reflecting the balance of domestic supply and demand.

International Trade

The exchange of goods, services, and capital between countries or territories.

Domestic Market

The domestic market refers to the economic activities and transactions happening within a country's borders, focusing on the buying and selling of goods and services locally.

Consumer Surplus

The gap between what consumers are prepared and can afford to pay for a product or service versus what they end up paying.