Tom's Toys has a cash balance of $100,000;temporary investments of $40,000;net receivables of $60,000;and inventory of $400,000.Tom's current liabilities total $125,000.His quick (acid test)ratio is:

Question

Quizplus · Accepted Answer

The quick (acid test) ratio is calculated as (Cash + Temporary Investments + Net Receivables) / Current Liabilities. For Tom's Toys, this is ($100,000 + $40,000 + $60,000) / $125,000 = $200,000 / $125,000 = 1.60 to 1.

Tom's Toys Has a Cash Balance of $100,000;temporary Investments of $40,000;net