A company has $200 in cash,$500 in accounts receivable,and $700 in inventory.If current liabilities are $400,then the quick ratio would be
A)1.75 to 1.
B)2.25 to 1.
C)3.00 to 1.
D)3.50 to 1.

Question

Quizplus · Accepted Answer

The quick ratio (also known as acid-test ratio) calculates a company's ability to meet short-term obligations using only quick assets (assets that can be easily converted into cash). To calculate the quick ratio, we add up the quick assets, which are cash and accounts receivable in this case, and divide by current liabilities. 
Quick assets = $200 (cash) + $500 (accounts receivable) = $700
Quick ratio = Quick assets / current liabilities = $700 / $400 = 1.75 to 1. 
Therefore, the correct answer is A.

A Company Has $200 in Cash,$500 in Accounts Receivable,and $700