Asked by Helmut Andres Florencia Roldan on Apr 26, 2024
Verified
A company with an acid-test ratio of 4.1 is unlikely to face near-term liquidity problems.
Acid-Test Ratio
A financial metric that measures a company's ability to cover its current liabilities with its most liquid assets.
Liquidity Problems
Financial challenges arising from a company's inability to convert assets to cash quickly without significant loss in value, possibly hindering its capacity to meet its short-term obligations.
- Comprehend the importance of liquidity ratios such as the acid-test ratio and current ratio for assessing a company's short-term financial stability.
Verified Answer
ME
manolo espanaMay 01, 2024
Final Answer :
True
Explanation :
An acid-test ratio of 4.1 indicates that the company has enough quick assets to cover its current liabilities, which means it is financially stable and does not face near-term liquidity problems.
Learning Objectives
- Comprehend the importance of liquidity ratios such as the acid-test ratio and current ratio for assessing a company's short-term financial stability.