Which of the following ratios can measure the ability of a firm to meet its obligations in the short…
The quick ratio is the most conservative short-term liquidity measure among those listed because it excludes inventory and prepaid expenses from assets available to meet…
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Which of the following ratios can measure the ability of a firm to meet its obligations in the short term most conservatively?
Answer and explanation
Correct answer C
The quick ratio is the most conservative short-term liquidity measure among those listed because it excludes inventory and prepaid expenses from assets available to meet current liabilities. The current ratio includes these less liquid current assets; debt-equity measures financing structure, and asset turnover measures operating efficiency.
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Andhra Pradesh SET (APSET)