The correct answer is D. Acid test ratio.
The acid test ratio, also known as the quick ratio, is a liquidity ratio that measures a company’s ability to pay off its short-term obligations with its most liquid assets. It is calculated by dividing a company’s current assets minus its inventory by its current liabilities.
A high acid test ratio indicates that a company has a good liquidity position and is able to meet its short-term obligations. A low acid test ratio indicates that a company may have difficulty meeting its short-term obligations.
The operating ratio is a profitability ratio that measures how efficiently a company uses its assets to generate sales. It is calculated by dividing a company’s operating expenses by its net sales.
A high operating ratio indicates that a company is not using its assets efficiently to generate sales. A low operating ratio indicates that a company is using its assets efficiently to generate sales.
The sales turnover ratio is a profitability ratio that measures how many times a company sells its inventory in a year. It is calculated by dividing a company’s net sales by its average inventory.
A high sales turnover ratio indicates that a company is selling its inventory quickly. A low sales turnover ratio indicates that a company is not selling its inventory quickly.
The current ratio is a liquidity ratio that measures a company’s ability to pay off its short-term obligations with its current assets. It is calculated by dividing a company’s current assets by its current liabilities.
A high current ratio indicates that a company has a good liquidity position and is able to meet its short-term obligations. A low current ratio indicates that a company may have difficulty meeting its short-term obligations.