Multiple choice

Directions: State whether the following statement is True Or False.

Equity to fixed interest bearing securities is Acid Test Ratio.

  1. True

  2. False

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Acid Test Ratio (or Quick Ratio) is calculated as (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities. It is not the ratio of equity to fixed interest-bearing securities, which is related to capital gearing.