The Acid-Test Ratio Differs from the Current Ratio in That

Multiple Choice

The acid-test ratio differs from the current ratio in that it

A) represents the amount of cash on hand instead of the amount of working capital.
B) excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible nonpayment.
C) is a stricter test of a company's ability to pay its current debts as they are due.
D) signals the need to liquidate marketable securities when it drops below 5 to 1.