Which of the Following Describes the Key Significance of the Acid-Test

Multiple Choice

Which of the following describes the key significance of the acid-test ratio?

A) It measures a company's ability to pay its current liabilities if they are due immediately.
B) It measures the ability of the company to earn profits out of the sales made by it.
C) It reflects how much long-term debt a company has.
D) It indicates how much cash could be realized by selling the inventory.