The numerator of the acid-test ratio consists of
A) total current assets.
B) cash inventory and marketable securities.
C) cash inventory and net receivables.
D) cash, marketable securities, and net receivables.

Question

Quizplus · Accepted Answer

The numerator of the acid-test ratio, also known as the quick ratio, includes cash, marketable securities, and net receivables. This ratio measures the ability of a company to pay off its short-term liabilities without relying on the sale of inventory. Including total current assets (choice A) or cash inventory and marketable securities (choice B) in the numerator would not provide an accurate measure of a company's liquidity, as these assets may not be easily convertible to cash. Choice C includes inventory, which is not part of the acid-test ratio formula. Therefore, choice D is the best answer.

The Numerator of the Acid-Test Ratio Consists of