Wolbers Company has an acid-test ratio of 1.4.Which of the following events will cause this ratio to decrease?
A)Selling merchandise on account.
B)Paying a cash dividend already declared.
C)Borrowing using a short-term note.
D)Selling equipment at a loss.

Question

Quizplus · Accepted Answer

When the acid-test ratio is greater than 1 then increasing both portions of the fraction by an equal amount would reduce the current ratio (e.g. ,$1,500 F1F1F1S1F1F1F10 $1,100 = 1.36. )

Wolbers Company Has an Acid-Test Ratio of 1