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a common rule of thumb is that a companys acid test ratio should have a value...

a common rule of thumb is that a companys acid test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near term liquidity problems. true or false?
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Answer #1

The given statement is TRUE.

Acid test ratio of 1 or greater than one shows that company have sufficient liquid assets to meet out its short term obligations.

it also shows that the company is ability to pay of its current liabilities without selling long term assets. Therefor there will not be any liqiidity issues for the company.

Acid test ratio is calculated to serve as a supplementary check on liquidity position of the business.

Note:- if you have any query fee free to ask in comment section, i will surely revert back.

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