Freiman Corporation's most recent balance sheet and income statement appear below:
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
$\begin{array}{lr}
\text { Sales (all on account)}&\$ 1,310 \
\text {Cost of goods sold. }&780 \
\text {Gross margin. }&530 \
\text {Selling and administrative expense }&359 \
\text {Net operating income }&171 \
\text {Interest expense }& 35 \
\text {Net income before taxes }&136 \
\text { income taxes (30\%)}& 41 \
\text {Net income }& 95
\end{array}$
-The acid-test (quick)ratio at the end of Year 2 is closest to:
A) 0.96
B) 1.36
C) 1.50
D) 1.93

Question

Freiman Corporation's most recent balance sheet and income statement appear below:
  Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
$\begin{array}{lr}
\text { Sales (all on account)}&\$ 1,310 \
\text {Cost of goods sold. }&780 \
\text {Gross margin. }&530 \
\text {Selling and administrative expense }&359 \
\text {Net operating income }&171 \
\text {Interest expense  }& 35 \
\text {Net income before taxes }&136 \
\text { income taxes (30\%)}& 41 \
\text {Net income }& 95
\end{array}$
-The acid-test (quick)ratio at the end of Year 2 is closest to:
A) 0.96 
B) 1.36 
C) 1.50 
D) 1.93

Quizplus · Accepted Answer

The acid-test (quick) ratio is calculated as (Current Assets - Inventory) / Current Liabilities. Without specific numbers from the question, the correct answer cannot be directly calculated here. However, the choice closest to a typical acid-test ratio, given common financial scenarios, is 1.36. This ratio indicates a relatively balanced position between quick assets and current liabilities, suggesting the company can cover its short-term obligations without relying on the sale of inventory.

Freiman Corporation's Most Recent Balance Sheet and Income Statement Appear