Acid-test ratio assesses immediate liquidity

Steps:

• Recall the acid-test ratio formula: quick assets divided by current liabilities.
• Identify liquid assets as quick assets (cash, marketable securities, receivables).
• Note the ratio compares these assets to short-term obligations.
• Match the denominator to the choices provided.

Why A is correct:

• The formula is quick assets / current liabilities, directly comparing liquid assets to obligations due within one year.

Why the others are wrong:

• B: Intangible assets like goodwill are not liquid and excluded from quick assets.
• C: Non-current assets are long-term and irrelevant to short-term liquidity.
• D: Non-current liabilities are long-term debts, not used in liquidity ratios.

Final answer: A