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JAMB Principles of Accounts 1995 Question 43

Question 43

Interpretation of Accounts

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

  1. A.current ratio
  2. B.turnover ratio
  3. C.acid test ratio
  4. D.return on investment.
Show the answer and explanation

Answer: C (acid test ratio)

Explanation

The acid test ratio leaves out stock and shows whether quick assets can pay current liabilities at once.