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WAEC Financial Accounting 2005 Question 37

Question 37

Interpretation of Accounts

Which of the following ratios measure the ability of a firm to meet short-term obligations?

  1. A.Net profit margin
  2. B.Quick asset ratio
  3. C.Turnover ratio
  4. D.Creditors ratio.
Show the answer and explanation

Answer: B (Quick asset ratio)

Explanation

The quick (acid-test) ratio measures short-term solvency.