A Corporation Reports the Following Year-End Balance Sheet Data A) 207
B) 0

question 75

Multiple Choice

A corporation reports the following year-end balance sheet data. The company's acid-test ratio equals: $\begin{array} { l c c c } \text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 75,000 \\\text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \\\text { Inventory } & 60,000 & \text { Common stock } & 100,000 \\& & & \\\text { Equipment } & 145,000 & \text { Retained earnings } & 90,000 \\\text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000\end{array}$

• A) 2.07
• B) 0.37
• C) 0.58
• D) 1.27
• E) 0.63

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Definitions:

Insurable Interest

The stake in the value of an item, life, or event for which an insurance policy is purchased to mitigate the risk of loss.

Creditor

An individual or entity to whom money is owed by a debtor.

Security Interest

A legal claim on assets granted to a creditor to secure a debt or obligation, providing the right to take property upon failure to repay.

Contribution

The right of insurers (more than one) to share a loss where the policies so provide.