Which of the following ratios measure a firm's short-time debt-paying ability?
- A) Debt to Asset Ratio
- B) Acid Test Ratio
- C) Payout Ratio
- D) Price to Earnings Ratio
Show answer
Answer: B) Acid Test Ratio
Explanation
The acid test ratio. It divides quick assets (cash, receivables, short-term investments) by current liabilities, showing whether bills due soon can be paid without selling stock. Debt to asset is about long-term solvency, payout is about dividends, and P/E is a market valuation measure.
Asked in: TGTDCL 2021