Smith Corporation has current assets of $11,400,inventories of $4,000,and a current ratio of 2.6.What is Smith's acid test ratio?
A)1.69
B)0.54
C)0.74
D)1.35

Question

Quizplus · Accepted Answer

Current assets = inventories + quick assets
quick assets = Current assets - inventories = $11,400 - $4,000 = $7,400
Acid test ratio = quick assets / current liabilities
We are not given information about current liabilities, so we cannot determine the exact value of the acid test ratio. However, we can determine the minimum value using the current ratio.
Current ratio = current assets / current liabilities
2.6 = $11,400 / current liabilities
Current liabilities = $4,384.62
Acid test ratio = $7,400 / $4,384.62 = 1.69

Therefore, the best choice is A) 1.69.

Smith Corporation Has Current Assets of $11,400,inventories of $4,000,and a Current