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      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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