The formula to compute the acid-test ratio is
A)(cash + short-term investments + net current receivables)/current assets.
B)(cash + short-term investments + net current receivables)/current liabilities.
C)current liabilities/current assets.
D)currents assets/current liabilities.

Question

Quizplus · Accepted Answer

The acid-test ratio, also called the quick ratio, is a measure of a company's liquidity. It takes into account only the most liquid assets, such as cash, short-term investments, and net current receivables (which excludes any doubtful accounts). The formula for the acid-test ratio is (cash + short-term investments + net current receivables)/current liabilities, or choice B. This ratio shows how capable a company is of paying its current liabilities with its most liquid assets.

The Formula to Compute the Acid-Test Ratio Is