The following balance sheet information is provided for Greene Company for 2014: What is the company's quick (acid-test) ratio?
A) 0.7
B) 1.4
C) 1.3
D) 3.8

Question

The following balance sheet information is provided for Greene Company for 2014:  What is the company's quick (acid-test) ratio?
A) 0.7 
B) 1.4 
C) 1.3 
D) 3.8

Quizplus · Accepted Answer

The quick (acid-test) ratio is calculated as (Cash and equivalents + Short-term investments + Accounts receivable) / Current liabilities. Plugging in the numbers from the balance sheet, the calculation is as follows: (40,000 + 20,000 + 60,000) / 90,000 = 1.3. Therefore, the company's quick ratio is 1.3.

The Following Balance Sheet Information Is Provided for Greene Company