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Financial Management/Management Accounting
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Directions: State whether the following statement is True Or False.
Equity to fixed interest bearing securities is Acid Test Ratio.
AnswerClick to flip back
A
False
💡 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.