The Acid-Test Ratio

question 42

Multiple Choice

The acid-test ratio

• A) is a quick calculation of an approximation of the current ratio.
• B) does not include all current liabilities in the calculation.
• C) does not include inventory as part of the numerator.
• D) does include prepaid expenses as part of the numerator.

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Definitions:

Vested Options

Stock options granted to an employee that the employee has the right to exercise, contingent upon fulfilling certain conditions such as employment duration.

Income

The financial gain received by an individual or a business in exchange for providing goods, rendering services, or through investing capital.

Retained Earnings

The part of a company's net earnings not paid out as dividends but kept within the company.