[amp_mcq option1=”Operating ratio” option2=”Net Profit ratio” option3=”Acid test ratio” option4=”None of these” correct=”option3″]
The correct answer is C. Acid test ratio.
An 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 liabilities with its most liquid assets. It is calculated by dividing a company’s current assets minus its inventory by its current liabilities.
An operating ratio is a profitability ratio that measures a company’s ability to generate profit from its sales. It is calculated by dividing a company’s operating income by its net sales.
A net profit ratio is a profitability ratio that measures a company’s ability to generate profit from its total revenue. It is calculated by dividing a company’s net income by its total revenue.
All of these ratios are used to analyze a company’s profitability, except for the acid test ratio. The acid test ratio is a liquidity ratio, not a profitability ratio.