Lisa Inc.'s acid test (quick)ratio at December 31,20 × 7,was closest to:
A) 0.6 to 1.
B) 1.1 to 1.
C) 1.8 to 1.
D) 2.0 to 1.

Question

Quizplus · Accepted Answer

The acid test (quick) ratio is calculated by dividing quick assets (cash, marketable securities, and accounts receivable) by current liabilities. The formula is as follows:

Acid Test Ratio = (Quick Assets) / (Current Liabilities)

There is no information given about the quick assets and current liabilities of Lisa Inc. However, we can determine the closest option by analyzing the options and selecting the one that is most likely to be near the average ratio for similar businesses.

Historically, a good acid test ratio for most industries is considered to be between 1.1 to 1.5. Therefore, the best choice for Lisa Inc.'s acid test ratio at December 31,20 × 7 is option B) 1.1 to 1.

Lisa Inc'S Acid Test (Quick)ratio at December 31,20 × 7,was Closest