The Acid-Test Ratio of a Firm Would Be Unaffected by Which

question 89

Multiple Choice

The acid-test ratio of a firm would be unaffected by which of the following?

• A) Several short-term loans are consolidated and paid off using long-term debt.
• B) Equipment is purchased, financed by a long-term debt issue.
• C) Additional inventory is purchased for cash.
• D) Large accounts receivable balances are collected.

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Definitions:

Utility Costs

Expenses incurred for essential services such as electricity, gas, water, and sewer, which are necessary for operating a business or maintaining a home.

Variable Factory Overhead Controllable Variance

The difference between actual variable overhead incurred and the expected (or budgeted) variable overhead based on standards set by management.

Standard Labor Hours

The estimated amount of time expected to produce a unit of output under normal conditions.

Overhead

Indirect costs related to the day-to-day running of a business, excluding direct costs like labor and materials.