Question
Please explain why lenders (bankers, supplies, etc) prefer the Acid-Test (Quick Ratio) Ratio rather than the Current Ratio in evaluating a business ability to
Please explain why lenders (bankers, supplies, etc) prefer the Acid-Test (Quick Ratio) Ratio rather than the Current Ratio in evaluating a business ability to pay short term obligations (current liabilities) from short term resources (current assets). What is the major difference between the current and acid-test ratios? Note: during the 2020 pandemic every retailer ceased operations because of the mandate to reduce the spread of the virus, and could not sell their inventories to repay their lenders. Businesses and lenders sufferred because of this.
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