Question

Because of exclusion of non-liquid current assets which of the following ratio is considered better than current ratio as a measure of liquidity position of the business?

Options

• Debt-Equity Ratio

• Acid Test Ratio

• Proprietary Ratio

• Interest Coverage Ratio

Answer 1

Acid Test Ratio

Explanation:

The quick ratio, sometimes known as the acid ratio, is thought to be a stronger indicator of liquidity position than the current ratio since it removes non-cash assets.