Question

The two basis to measure Liquidity Ratios are ______.

Options

• Current Ratio and Net Profit Ratio.

• Quick Ratio and Gross Profit Ratio.

• Current Ratio and Acid Test Ratio.

• Operating Ratio and Return on Investment.

Answer 1

The two basis to measure Liquidity Ratios are Current Ratio and Acid Test Ratio.

Explanation:

Liquidity ratios measure short-term debt-paying ability. The Current Ratio tests this by using all current assets, while the Acid Test Ratio is a stricter measure that removes inventory and prepaid expenses to focus purely on assets that can be converted into cash instantly.