Erambo Company has $11,000 in cash,$6,000 in marketablesecurities,$27,000 in current receivables,$8,000 in inventories,and $51,000 in current liabilities.The company's acid-test (quick)ratio is closest to which of the following?

Question

Quizplus · Accepted Answer

The acid-test (quick) ratio is calculated by adding up only the most liquid assets (such as cash, marketable securities, and receivables) and dividing by current liabilities. In this case, the most liquid assets would be the $11,000 in cash and the $6,000 in marketable securities, which add up to $17,000. Adding in the $27,000 in receivables gives a total of $44,000. Dividing by the $51,000 in current liabilities gives a ratio of 0.86 to 1 (rounded to two decimal places). Therefore, the closest answer choice is C.

Erambo Company Has $11,000 in Cash,$6,000 in Marketablesecurities,$27,000 in Current