A firm's current liabilities amount to $30,000.It does not have any marketable securities and receivables amount to $20,000.Calculate the acid-test ratio of the firm if it has $40,000 cash in hand.
A) 2.0
B) 0.5
C) 1.0
D) 1.67
E) 1.5

Question

Quizplus · Accepted Answer

A)Acid-test ratio is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities. It is a measure of a firm's short-term liquidity.
Acid-test ratio = (cash + marketable securities + receivables)/current liabilities = ($40,000 + 0 + $20,000)/$30,000 = 2.0.
B)Acid-test ratio is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities. It is a measure of a firm's short-term liquidity.
Acid-test ratio = (cash + marketable securities + receivables)/current liabilities = ($40,000 + 0 + $20,000)/$30,000 = 2.0.
C)Acid-test ratio is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities. It is a measure of a firm's short-term liquidity.
Acid-test ratio = (cash + marketable securities + receivables)/current liabilities = ($40,000 + 0 + $20,000)/$30,000 = 2.0.
D)Acid-test ratio is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities. It is a measure of a firm's short-term liquidity.
Acid-test ratio = (cash + marketable securities + receivables)/current liabilities = ($40,000 + 0 + $20,000)/$30,000 = 2.0.
E)Acid-test ratio is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities. It is a measure of a firm's short-term liquidity.
Acid-test ratio = (cash + marketable securities + receivables)/current liabilities = ($40,000 + 0 + $20,000)/$30,000 = 2.0.

A Firm's Current Liabilities Amount to $30,000