Question

the blank ratio takes the sum of cash, short-term investments, and current receivables and divides the total by current liabilities. it helps determine immediate short-term debt-paying ability. multiple choice question. current debt acid-test debt-to-equity need help? review these concept resources.

Answer 1

The acid-test ratio is a financial ratio that measures a company's immediate short-term debt-paying ability. It is calculated by dividing the sum of cash, short-term investments, and current receivables by current liabilities.

Step-by-step explanation:

The blank ratio referred to in the question is the **acid-test ratio**. The acid-test ratio is a financial ratio that measures a company's immediate short-term debt-paying ability. It is calculated by dividing the sum of cash, short-term investments, and current receivables by current liabilities.

For example, if a company has $10,000 in cash, $5,000 in short-term investments, and $7,000 in current receivables, with $8,000 in current liabilities, the acid-test ratio would be calculated as follows:

($10,000 + $5,000 + $7,000) / $8,000 = 22,000 / 8,000 = 2.75

This means that for every $1 of current liabilities, the company has $2.75 of highly liquid assets that can be used to pay off the debt.