Question

Which of the following ratios indicates the short term solvency of the firm

• A. Profit to capital
• B. Gross profit to sales
• C. Current assets to current liabilities
• D. Current assets to fixed assets

Answer 1

Answer:

C. Current assets to current liabilities

Acid test ratios indicate the short-term liquidity of a business. The acid-test ratio uses a firm's balance sheet data as an indicator of whether it has sufficient short-term assets to cover its short-term liabilities.