The measure of a company's ability to pays its debts quickly is called

  • A Current ratio
  • B turnover ratio
  • C acid test ratio
  • D return of investment
jamb 1995accounting

The correct answer is C. acid test ratio

The measure of a company’s ability to pay its debts quickly is called the acid test ratio.

The acid test measures a company’s ability to meet its short-term obligations with its most liquid assets.

It excludes inventories from current assets, as they may not be easily convertible to cash.

The acid test ratio is also known as the quick ratio.

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