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    Question

    Which financial ratio is used to assess a company’s

    ability to cover its short-term liabilities using only its most liquid assets?
    A Current Ratio Correct Answer Incorrect Answer
    B Quick Ratio Correct Answer Incorrect Answer
    C Debt-to-Equity Ratio Correct Answer Incorrect Answer
    D Interest Coverage Ratio Correct Answer Incorrect Answer
    E Return on Capital Employed Correct Answer Incorrect Answer

    Solution

    The Quick Ratio (Acid-Test Ratio) measures a company's ability to meet short-term obligations using only highly liquid assets (excluding inventory). It is calculated as: Quick Ratio = (Current Assets - Inventory) / Current Liabilities.

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