What Is the Reason for Computing the Acid Test Ratio

question 104

Multiple Choice

What is the reason for computing the acid test ratio in addition to the current ratio?

• A) inventory is the most liquid of the liquid assets.
• B) a firm's inventory may not be particularly liquid.
• C) inventory is the best collateral for short term loans.
• D) compared to accounts receivable, inventory balances may be difficult to verify

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Definitions:

Classification

The systematic arrangement in groups or categories according to established criteria.

Burn

An injury to flesh caused by heat, chemicals, electricity, radiation, or other external sources.

Alkalines

Substances having a pH greater than 7, often referred to as bases, and can neutralize acids.

Contact

The act of communication or interaction with someone, or the physical touching of an object or surface.