To calculate the acid-test ratio, merchandise inventory and prepaid expenses are ignored.

Name: To calculate the acid-test ratio, merchandise inventory and prepaid expenses are ignored.
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Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, only considers quick assets such as cash, marketable securities, and accounts receivable. Merchandise inventory and prepaid expenses are not considered quick assets and therefore are ignored in the calculation of the acid-test ratio.

To Calculate the Acid-Test Ratio, Merchandise Inventory and Prepaid Expenses