Asked by Sierra Summers on May 04, 2024
Verified
A company could improve its acid-test ratio by selling some equipment it no longer needs for cash.
Acid-Test Ratio
A stringent measure of liquidity that assesses a company's ability to meet its short-term obligations without relying on the sale of inventories.
- Acquire knowledge about how transactions affect liquidity and efficiency indicators, including the acid-test ratio and the average collection period.
Verified Answer
HL
holden landryMay 08, 2024
Final Answer :
True
Explanation :
Selling equipment for cash will increase the company's cash balance, which is a component of the acid-test ratio formula. Therefore, it will improve the acid-test ratio.
Learning Objectives
- Acquire knowledge about how transactions affect liquidity and efficiency indicators, including the acid-test ratio and the average collection period.
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