In the acid test ratio, inventory and prepaid expenses are excluded.

Name: In the acid test ratio, inventory and prepaid expenses are excluded.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The acid test ratio, also known as the quick ratio, excludes inventory and prepaid expenses as they may not be readily convertible to cash in a short amount of time. The formula for the acid test ratio is (current assets - inventory - prepaid expenses) / current liabilities.

In the Acid Test Ratio, Inventory and Prepaid Expenses Are