Which of the following ratios is also known as the Quick Ratio?

The Quick Ratio, also known as the Acid Test Ratio, is a financial metric used to evaluate a company's ability to meet its short-term obligations using its most liquid assets. This ratio is significant because it provides a more stringent assessment of a company's liquidity compared to the Current Ratio.

The Quick Ratio excludes inventory from current assets, focusing only on cash, cash equivalents, and receivables. This is important because inventory may not be as readily convertible to cash as other assets, especially in times of financial distress or slow market conditions. Therefore, the Quick Ratio gives a clearer picture of a company's immediate financial health and its quick solvency.

Utilizing the Quick Ratio, a business can assess whether it can pay off its current liabilities even if it can't sell its inventory quickly. This makes it a critical tool for investors and creditors when analyzing the liquidity position of a business.