When Calculating the Quick (Acid Test) Ratio, Which of the Following

question 20

Multiple Choice

When calculating the quick (acid test) ratio, which of the following is normally deducted from current assets?

• A) Current liabilities
• B) Cash and prepayments
• C) Inventory and prepaid expenses
• D) Inventory and accounts receivable

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Definitions:

Financial Statement

Reports that summarize a company's financial performance, status, and cash flows over a specified period.

Permanent/Temporary

A classification that distinguishes between actions or objects that are intended to last indefinitely (permanent) and those expected to change or conclude after a certain period (temporary).

Normal Balance

The side of the accounting equation (debit or credit) where increases in the account are recorded.

Financial Statement

A written report which quantitatively describes the financial health of a company, including balance sheet, income statement, and cash flow statement.