What Is the Acid-Test Ratio for a Merchandiser Having the Following

question 101

Multiple Choice

What is the acid-test ratio for a merchandiser having the following balances? (Round to two decimal places.) $$\begin{array} { | l | r | } \hline \text { Cash } & \$ 20,000 \\\hline \text { Short-term investments } & 40,000 \\\hline \text { Net current receivables } & 50,000 \\\hline \text { Merchandise Inventory } & 90,000 \\\hline \text { Total current liabilities } & 275,000 \\\hline\end{array}$$

• A) 0.93
• B) 0.40
• C) 0.64
• D) 1.76

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Definitions:

Straight-Line Depreciation

A method for apportioning the cost of a tangible asset over its viable life in steady yearly figures.

Operating Cash Inflow

Funds that are generated from a company's normal business operations, reflecting the cash inflows from selling goods and services.

Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquid assets available for day-to-day operations.

Straight-Line Depreciation

A way of allocating an asset's expenditure smoothly over its effective life.