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:

Interest Rate

A lender demands a fee, represented as a percentage of the principal, from a borrower for asset utilization.

Payment

is the transfer of money or goods from one party to another in exchange for goods, services, or to fulfill a legal obligation.

Future Value

The value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

Deposit

A sum of money placed or kept in a bank account, usually to gain interest.