Refer to the Following Selected Financial Information from Texas Electronics

question 117

Multiple Choice

Refer to the following selected financial information from Texas Electronics. Compute the company's acid-test ratio for Year 2. $\begin{array}{lrr}& \text { Year 2 } & \text { Year 1 } \\\text { Cash } & \$ 37,500 & \$ 36,850 \\\text { Short-term investments } & 90,000 & 90,000 \\\text { Accounts receivable, net } & 85,500 & 86,250 \\\text { Merchandise inventory } & 121,000 & 117,000 \\\text { Prepaid expenses } & 12,100& 13,500\\\text { Plant assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,400 & 111,750 \\\text { Net sales } & 711,000 & 706,000 \\\text { Cost of goods sold } & 390,000 & 385,500\end{array}$

• A) 2.26.
• B) 1.98.
• C) 2.95.
• D) 3.05.
• E) 1.88.

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Definitions:

Reserve Requirement

The minimum fraction of customer deposits and notes that each commercial bank must hold as reserves rather than lending out, set by the central bank.

Demand Deposits

Bank accounts from which money can be withdrawn at any time without any notice to the institution.

Time Deposits

Banking or financial instruments that require the holder to keep the money deposited for a fixed term or period of time, often offering higher interest rates than savings accounts.

Federal Reserve Banks

A system of 12 banks in the United States that serve as the central banking system, responsible for implementing monetary policy, regulating banks, and ensuring the stability of the financial system.