You are concerned that your business might be unable to pay its current debts when they fall due. You have therefore decided to undertake some financial statement analysis to understand the situation and any issues of liquidity.

In these circumstances, is the current ratio or the acid test to be a better measure of liquidity? In your own words, explain why.

Please answer the above question and provide your response in the space below. You are welcome to use bold, underline and/or italics to emphasize parts of your answer.