Asked by Nehmiah Edward on Sep 28, 2024
Verified
Current ratios and acid-test ratios are types of liquidity ratios.
Acid-Test Ratios
A financial metric that evaluates a company's ability to pay off its short-term liabilities with its quick assets, providing insight into its short-term financial health.
Liquidity Ratios
Financial metrics used to determine an organization's ability to pay off its short-term debts with its liquid assets.
- Gain insight into the array of financial ratios and their respective functions.
Verified Answer
IC
Inspirational Channel1 day ago
Final Answer :
True
Explanation :
Current ratios and acid-test ratios are both examples of liquidity ratios, which are used to measure a company's ability to meet its short-term obligations. The current ratio measures a company's current assets relative to its current liabilities, while the acid-test ratio (also known as the quick ratio) measures a company's ability to pay off its short-term debts using only its most liquid assets (such as cash and accounts receivable).
Learning Objectives
- Gain insight into the array of financial ratios and their respective functions.
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