Question

A corporation reports the following year-end balance sheet data. The company's acid-test ratio equals:

Cash$40,000
Current liabilities$75,000
Accounts receivable 55,000
Long-term liabilities 35,000
Inventory 60,000
Common stock 100,000
Equipment 145,000
Retained earnings 90,000
Total assets$300,000
Total liabilities and equity$300,000

Answer 1

Answer: 1.27

Step-by-step explanation:

The acid test ratio of a company measure how well a company would be able to pay off its current liabilities using its most liquid current assets (current assets less inventory).

= (Cash + Accounts Receivable) / Current liabilities

= (40,000 + 55,000) / 75,000

= 95,000 / 75,000

= 1.27