Asked by Risha Aprilia on Apr 29, 2024
Verified
Refer to the following selected financial information from Fennie's, LLC. Compute the company's acid-test ratio for Year 2. 
A) 2.26.
B) 1.98.
C) 2.95.
D) 3.05.
E) 1.88.
Acid-test Ratio
A financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets, excluding inventory.
- Compute and analyze the acid-test (quick) ratio for assessing immediate liquidity.
Verified Answer
MU
muhammed ulutasApr 30, 2024
Final Answer :
E
Explanation :
Acid-test ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities
Acid-test ratio = ($57,000 + $28,000 + $87,000) / $110,000
Acid-test ratio = $172,000 / $91,500
Acid-test ratio = 1.88
Acid-test ratio = ($57,000 + $28,000 + $87,000) / $110,000
Acid-test ratio = $172,000 / $91,500
Acid-test ratio = 1.88
Learning Objectives
- Compute and analyze the acid-test (quick) ratio for assessing immediate liquidity.