KLM Corporation's quick assets are $5,888,000,its current assets are $11,700,000 and its current liabilities are $8,000,000.Its acid-test ratio equals:
A)0.50.
B)0.68.
C)0.74.
D)1.50.
E)2.20.

Question

Quizplus · Accepted Answer

The acid-test ratio is calculated by dividing quick assets by current liabilities:

Acid-test Ratio = (Quick Assets) / (Current Liabilities)

Quick assets = Current assets - Inventory 
Quick assets = $11,700,000 - $5,888,000 = $5,812,000

Acid-test Ratio = $5,812,000 / $8,000,000 = 0.7275 or 0.74 (rounded to two decimal places)

Therefore, the acid-test ratio equals 0.74, which is option C.

KLM Corporation's Quick Assets Are $5,888,000,its Current Assets Are $11,700,000