Asked by Blukey McDowall on Jun 20, 2024

verifed

Verified

The acid-test (quick) ratio at the end of Year 2 is closest to:

A) 0.72
B) 0.83
C) 0.59
D) 1.25

Acid-Test Ratio

A stringent indicator of a company's liquidity, calculated by dividing liquid assets excluding inventories by current liabilities.

Company

A business organization founded by a group of individuals dedicated to pursuing and administering a commercial or industrial venture.

  • Calculate and interpret the acid-test (quick) ratio to evaluate a company's immediate liquidity without relying on inventory.
verifed

Verified Answer

AM
Alissa M. LosetoJun 22, 2024
Final Answer :
C
Explanation :
Quick assets = Cash + Marketable securities + Accounts receivable + Short-term notes receivable
= $90 + $0 + $100 = $190
Acid-test ratio = Quick assets ÷ Current liabilities = $190 ÷ $320 = 0.59 (rounded)