The least liquid current asset,________,is eliminated when calculating the acid test ratio.

Question

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The least liquid current asset is inventory, as it takes time to sell and convert it into cash. Therefore, it is eliminated when calculating the acid test ratio, which focuses exclusively on highly liquid assets that can be quickly converted into cash to pay off short-term liabilities. Cash (A) and accounts receivable (B) are both highly liquid current assets that are included in the acid test ratio. Land (D) is a non-current asset and not included in calculating the acid test ratio.

The Least Liquid Current Asset,________,is Eliminated When Calculating the Acid