Merchandise inventory and prepaid expenses are excluded from the acid-test ratio.

Name: Merchandise inventory and prepaid expenses are excluded from the acid-test ratio.
Brand: Quizplus
Rating: 4.8 (35 reviews)

Question

Quizplus · Accepted Answer

Merchandise inventory and prepaid expenses are not as liquid as cash or accounts receivable, and therefore are not included in the acid-test ratio. The acid-test ratio, also known as the quick ratio, only includes assets that can quickly be converted to cash to meet short-term obligations.

Merchandise Inventory and Prepaid Expenses Are Excluded from the Acid-Test