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WAEC Financial Accounting 2001 Question 9

Question 9

Interpretation of Accounts

Which of the following explains the short term solvency of a company?

  1. A.Acid test ratio
  2. B.Debtor to equity ratio
  3. C.Net profit margin ratio
  4. D.Gross profit margin ratio.
Show the answer and explanation

Answer: A (Acid test ratio)

Explanation

The acid-test ratio shows whether liquid assets can meet current liabilities.