Question

    Which of the following ratios is a measure of a firm's

    short-term liquidity position?
    A Debt-to-Equity Ratio Correct Answer Incorrect Answer
    B Return on Equity (ROE) Correct Answer Incorrect Answer
    C Interest Coverage Ratio Correct Answer Incorrect Answer
    D Quick Ratio Correct Answer Incorrect Answer
    E Inventory Turnover Ratio Correct Answer Incorrect Answer

    Solution

    The Quick Ratio, also known as the Acid-Test Ratio, measures a company’s ability to pay its short-term liabilities using its most liquid assets (excluding inventory). A ratio greater than 1 generally indicates the firm can comfortably meet its short-term obligations.

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