Asked by Hailey Gallant on Jun 29, 2024
Verified
Data from Fontecchio Corporation's most recent balance sheet appear below: 
The corporation's acid-test ratio is closest to:
A) 0.35
B) 0.15
C) 0.68
D) 0.79
Acid-Test Ratio
A liquidity ratio measuring a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.
Balance Sheet
A report that encapsulates a business's assets, debts, and owner's equity at a certain date.
- Investigate the effects transactions have on critical liquidity measures, including the current and acid-test ratios.
Verified Answer
JR
Jenny RabangJul 02, 2024
Final Answer :
C
Explanation :
The acid-test ratio is calculated by dividing the sum of cash, accounts receivable, and short-term investments by the total current liabilities.
Acid-Test Ratio = (Cash + Accounts Receivable + Short-term Investments) / Current Liabilities
= (230,000 + 150,000 + 0) / 220,000
= 0.68
Therefore, the acid-test ratio is closest to 0.68, which is option C.
Acid-Test Ratio = (Cash + Accounts Receivable + Short-term Investments) / Current Liabilities
= (230,000 + 150,000 + 0) / 220,000
= 0.68
Therefore, the acid-test ratio is closest to 0.68, which is option C.
Learning Objectives
- Investigate the effects transactions have on critical liquidity measures, including the current and acid-test ratios.
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