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JAMB Principles of Accounts 1995 Question 41

Question 41

Interpretation of Accounts

Which of the following ratios gives an idea of the liquidity of a firm?

  1. A.Turnover ratio
  2. B.Quick ratio
  3. C.Debt ratio
  4. D.Dividend yield.
Show the answer and explanation

Answer: B (Quick ratio)

Explanation

The quick (acid test) ratio compares quick assets with current liabilities, showing the ability to pay short-term debts.