The correct answer is C. Acid-Test (or Quick) ratio.
The acid-test ratio, or 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 inventories by its current liabilities.
A high acid-test ratio indicates that a company has a large amount of liquid assets relative to its short-term obligations. This means that the company is likely to be able to pay off its short-term debts as they come due. A low acid-test ratio, on the other hand, indicates that a company has a small amount of liquid assets relative to its short-term obligations. This means that the company may have difficulty paying off its short-term debts as they come due.
The acid-test ratio is a useful tool for creditors and investors to assess a company’s liquidity. A high acid-test ratio indicates that a company is likely to be able to pay off its short-term debts as they come due, which makes it a less risky investment. A low acid-test ratio, on the other hand, indicates that a company may have difficulty paying off its short-term debts as they come due, which makes it a riskier investment.
The other options are incorrect because they do not measure a company’s liquidity. The liquidity ratio measures a company’s ability to pay off its short-term obligations. The current ratio is a liquidity ratio that measures a company’s ability to pay off its short-term obligations with its current assets. The debts ratio is a leverage ratio that measures a company’s financial leverage.