What Is the Reason for Computing the Acid-Test Ratio in Addition

question 67

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.

---

Definitions:

Strategic Business Unit

A semi-autonomous division or unit within a company that focuses on a specific market or product line, with its own strategy and objectives.

Board of Directors

A group of individuals elected to represent shareholders and govern the activities of a corporation.

Government Agencies

Official organizations operated by the government to implement laws, provide services, and oversee various areas of public interest and policy.

Industry

A group of companies or businesses that produce or sell similar products or services.