The Acid-Test Ratio Would Include in the Denominator

question 33

Multiple Choice

The acid-test ratio would include in the denominator:

• A)total liabilities.
• B)long-term liabilities.
• C)total current liabilities.
• D)total current assets.

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Definitions:

Direct Method

A cash flow statement presentation method that shows actual cash flows from operating activities, detailing specific sources and uses of cash, as opposed to the indirect method which adjusts net income for non-cash transactions.

Dividends

Regular payments made by a corporation to its shareholders out of its profits or reserves.

Financing Activities

Transactions that result in changes in the size and composition of the equity and borrowings of an entity.

Marketable Securities

Financial instruments that are easily convertible into cash and are therefore considered very liquid.