If a company has an acid test ratio of 1.00,$5 million in inventory,and $10 million in current liabilities,what are its total current assets?
A)$5 million
B)$10 million
C)$15 million
D)$20 million

Question

Quizplus · Accepted Answer

The acid test ratio is calculated as (Cash + Marketable Securities + Receivables) / Current Liabilities. Given an acid test ratio of 1.00, this means that the company's quick assets (Cash + Marketable Securities + Receivables) equal its current liabilities ($10 million). Since inventory is not included in the acid test ratio and the company has $5 million in inventory, the total current assets would be the sum of quick assets ($10 million) and inventory ($5 million), totaling $15 million.

If a Company Has an Acid Test Ratio of 1