When calculating the quick (acid test) ratio, which of these is normally deducted from current assets?
A) Inventory and prepaid expenses
B) Cash and prepayments
C) Current liabilities
D) Inventory and accounts receivable

Question

Quizplus · Accepted Answer

The quick (acid test) ratio is a measure of a company's ability to meet its short-term financial obligations. To calculate the quick ratio, inventory and prepaid expenses are normally deducted from current assets as they are not easily convertible to cash. The remaining amount is then divided by current liabilities to arrive at the ratio.

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