Dilma, a finance manager at FinTel Inc., needs to understand the current financial position of the company in terms of meeting its short-term financial obligations. Dilma must calculate the ___ to accomplish this task.

A) debt ratio
B) asset turnover
C) return on assets
D) inventory turnover
E) acid test ratio

Question

Tiffany Snider · Accepted Answer

Final Answer : E, Explanation :  The acid test ratio (also known as the quick ratio) measures a company's ability to meet its short-term financial obligations using only its most liquid assets (cash, marketable securities, and accounts receivable). This ratio is useful for managers like Dilma who need to quickly assess the company's ability to pay its bills in the near future. The debt ratio (A) measures the proportion of a company's assets that are financed by debt, the asset turnover (B) measures a company's efficiency in generating sales from its assets, the return on assets (C) measures a company's profitability relative to its total assets, and the inventory turnover (D) measures a company's efficiency in selling and replacing its inventory. These ratios are important for understanding different aspects of a company's financial position, but they are not specifically focused on short-term financial obligations.

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