Question

Which of the following, in the banking sector, measures the ability of a company to meet its short term debt obligations?

• A. Current ratio
• B. Acid test ratio
• C. Cash ratio
• D. Working capital ratio
• E. All of these

Answer 1

The correct option is E All of these

Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. The liquidity ratios are a result of dividing cash and other liquid assets by the short term borrowings and current liabilities. Most common examples of liquidity ratios include current ratio, acid test ratio (also known as quick ratio), cash ratio and working capital ratio.