If a Company Has an Acid Test Ratio of 1

question 21

Multiple Choice

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

---

Definitions:

Voting Stock

Shares that give the shareholder the right to vote on company matters, such as electing the board of directors.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Equity Methods

An accounting technique used for recording investments in associate companies where the investor has significant influence but does not have full control or majority ownership, typically implying ownership of 20% to 50% of the voting stock.

Voting Stock

Shares of a corporation that grant the shareholder the right to vote on corporate matters, such as the election of the board of directors.