A Company Could Improve Its Acid-Test Ratio by Selling Some

question 121

True/False

A company could improve its acid-test ratio by selling some equipment it no longer needs for cash.

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Definitions:

Depreciation Rate

The percentage or method used to calculate the decrease in value of an asset over time due to use, wear and tear, or obsolescence.

FIFO Approach

A method of inventory valuation where the first items put into inventory are the first ones to be recorded as sold.

Sum-Of-The-Years'-Digits Method

A depreciation technique that results in a more accelerated write-off of an asset over its useful life, by applying a decreasing fraction to its depreciable cost.

Repairs

Expenditures that restore an asset to its previous operating condition or maintain the asset in its current condition, without significantly enhancing its value.