Asked by Blukey McDowall on Jun 20, 2024
Verified
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 0.72
B) 0.83
C) 0.59
D) 1.25
Acid-Test Ratio
A stringent indicator of a company's liquidity, calculated by dividing liquid assets excluding inventories by current liabilities.
Company
A business organization founded by a group of individuals dedicated to pursuing and administering a commercial or industrial venture.
- Calculate and interpret the acid-test (quick) ratio to evaluate a company's immediate liquidity without relying on inventory.
Verified Answer
AM
Alissa M. LosetoJun 22, 2024
Final Answer :
C
Explanation :
Quick assets = Cash + Marketable securities + Accounts receivable + Short-term notes receivable
= $90 + $0 + $100 = $190
Acid-test ratio = Quick assets ÷ Current liabilities = $190 ÷ $320 = 0.59 (rounded)
= $90 + $0 + $100 = $190
Acid-test ratio = Quick assets ÷ Current liabilities = $190 ÷ $320 = 0.59 (rounded)
Learning Objectives
- Calculate and interpret the acid-test (quick) ratio to evaluate a company's immediate liquidity without relying on inventory.