Data from Fontecchio Corporation's most recent balance sheet appear below: The corporation's acid-test ratio is closest to:
A) 0.35
B) 0.15
C) 0.68
D) 0.79

Question

Data from Fontecchio Corporation's most recent balance sheet appear below:  The corporation's acid-test ratio is closest to:
A) 0.35 
B) 0.15 
C) 0.68 
D) 0.79

Quizplus · Accepted Answer

The acid-test ratio is calculated by dividing the sum of cash, accounts receivable, and short-term investments by the total current liabilities.

Acid-Test Ratio = (Cash + Accounts Receivable + Short-term Investments) / Current Liabilities
= (230,000 + 150,000 + 0) / 220,000
= 0.68

Therefore, the acid-test ratio is closest to 0.68, which is option C.

Data from Fontecchio Corporation's Most Recent Balance Sheet Appear Below