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WAEC Financial Accounting 2021 Question 40

Question 40

Interpretation of Accounts

Acid test ratio of a firm measures the

  1. A.profitability of a firm.
  2. B.capital adequacy of a firm
  3. C.liquidity of a firm.
  4. D.quality of debtors of a firm.
Show the answer and explanation

Answer: C (liquidity of a firm.)

Explanation

The acid test shows whether quick assets can meet current liabilities: liquidity.