What Is the Acid-Test Ratio for a Merchant with the Following

question 105

Multiple Choice

What is the acid-test ratio for a merchant with the following account balances? (Round your answer to two decimal places.) $$\begin{array} { | l | l | } \hline \text { Cash } & \$ 21,000 \\\hline \text { Short-term investments } & 44,000 \\\hline \text { Net current receivables } & 54,000 \\\hline \text { Merchandise inventory } & 21,000 \\\hline \text { Total current liabilities } & 275,000 \\\hline\end{array}$$

• A) 0.76
• B) 0.43
• C) 0.60
• D) 0.83

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Definitions:

Corporations Act

The Corporations Act 2001 is Australian Commonwealth legislation that covers many aspects of the operations of Australian companies, including requiring certain types of entities to prepare financial statements.

Winding Up

The process of dissolving a company, where its assets are liquidated to pay off creditors, and any remaining assets are distributed among shareholders.

Just and Equitable

Principles guiding courts in making decisions that are considered fair and reasonable under the given circumstances.

Declaration of Solvency

A formal statement made by the directors of a company declaring that the company can meet its debts as they fall due.