The acid test ratio does not include:
A) Cash
B) Accounts receivable
C) Supplies
D) Inventory
E) None of these

Question

Quizplus · Accepted Answer

The acid test ratio (also known as the quick ratio) is used to measure a company's ability to pay its short-term liabilities using its most liquid assets. It does not include inventory, as this asset may take time to sell and convert to cash. The formula for the acid test ratio is (cash and cash equivalents + accounts receivable + short-term investments) / current liabilities. Supplies may be included in the calculation if they are considered highly liquid and easily converted to cash.

The Acid Test Ratio Does Not Include