Current Ratio vs
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Questions and Answers

What does the current ratio measure?

  • A company's long-term solvency
  • A company's ability to pay its short-term liabilities with its short-term assets (correct)
  • A company's profitability and efficiency
  • A company's ability to generate sales from its assets

    • What is the quick ratio also known as?

  • Acid-test ratio (correct)
  • Debt-to-equity ratio
  • Inventory turnover ratio
  • Return on assets ratio

    • How is the quick ratio different from the current ratio?

  • It excludes inventory from current assets (correct)
  • It includes prepaid expenses in current assets
  • It includes long-term investments in current assets
  • It excludes accounts payable from current liabilities

    • Which ratio includes inventory in its calculation?

    <p>Current ratio</p> Signup and view all the answers

    Which ratio provides a more stringent measure of a company's liquidity?

    <p>Quick ratio</p> Signup and view all the answers

    Which ratio is unaffected by changes in inventory valuation methods?

    <p>Quick ratio</p> Signup and view all the answers

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