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

question 130

Multiple Choice

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

• A) accounts payable are reduced by obtaining a short-term loan
• B) common stock is sold and the money is invested in marketable securities
• C) inventories are sold for cash
• D) inventories are sold on a short-term credit basis

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Definitions:

Opportunity Costs

The benefit lost when one alternative is chosen over another, representing the cost of forgoing the next best alternative.

Accounts

This term involves the records that summarize transactions affecting the financial position and operating results of a business.

Supervisory Costs

Indirect costs related to the salaries and benefits of supervisory staff within the production process.

Machine Hours

A measure of production activity or volume based on the number of hours machines are operating in the manufacturing process.