Nickolls Corporation has provided the following financial data: The company's acid-test (quick) ratio is closest to:
A)2.47
B)2.83
C)3.10
D)4.25

Question

Nickolls Corporation has provided the following financial data:  The company's acid-test (quick) ratio is closest to:
A)2.47 
B)2.83 
C)3.10 
D)4.25

Quizplus · Accepted Answer

The acid-test (quick) ratio is calculated by subtracting inventories from current assets and dividing the resulting figure by current liabilities.

Acid-Test (Quick) Ratio = (Current Assets - Inventories) / Current Liabilities

From the given data, 
Current Assets = $730,000 + $56,000 + $24,000 = $810,000 
Inventories = $56,000 
Current Liabilities = $210,000

Plugging the values into the formula, we get:

Acid-Test (Quick) Ratio = ($810,000 - $56,000) / $210,000 = 2.83

Therefore, the closest option is B) 2.83.

Nickolls Corporation Has Provided the Following Financial Data: the Company's