Which of the following is the formula to compute the acid-test ratio?
A)(Cash + short-term investments + net current receivables)/current assets
B)Current liabilities/current assets
C)(Cash + short-term investments + net current receivables)/current liabilities
D)Currents assets/current liabilities

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, is calculated by dividing the sum of cash, short-term investments, and net current receivables by current liabilities. This formula excludes inventory from current assets because it may not be easily converted into cash. Therefore, the correct formula is (cash + short-term investments + net current receivables) / current liabilities, and the best choice is C.

Which of the Following Is the Formula to Compute the Acid-Test