Find the current ratio and the acid-test ratio for the indicated year. Round each ratio to the nearest hundredth of a percent.
- Last year current liabilities were $197,000.
A)1.46; 0.85
B)1.46; 0.66
C)1.25; 0.71
D)1.25; 0.85

Question

Find the current ratio and the acid-test ratio for the indicated year. Round each ratio to the nearest hundredth of a percent.
- Last year current liabilities were $197,000.
A)1.46; 0.85 
B)1.46; 0.66 
C)1.25; 0.71 
D)1.25; 0.85

Quizplus · Accepted Answer

To find the current ratio, we divide current assets by current liabilities. The problem does not provide us with current assets, so we cannot calculate the exact answer. However, we can eliminate choices A and B because they have the same current ratio, and it is unlikely that the acid-test ratio would change by a significant amount between the two options.

To find the acid-test ratio, we take current assets, subtract inventory, and divide by current liabilities. Again, we do not have the exact numbers for current assets and inventory, so we cannot calculate the exact answer. However, we can eliminate choice D because it has the same current ratio as choice C, but a higher acid-test ratio, which is unlikely. Therefore, the best choice is C, with a current ratio of 1.25 and an acid-test ratio of 0.71.

Find the Current Ratio and the Acid-Test Ratio for the Indicated