Data from Fontecchio Corporation's most recent balance sheet appear below: $\begin{array}{lr}
\text {Cash. }&\$18,000\
\text {Marketable securities }&\$24,000\
\text {Accounts receivable. }&\$39,000\
\text {Short-term notes receivable. }&\$0\
\text {Inventory. }&\$60,000\
\text {Prepaid expenses }&\$14,000\
\text {Current liabilities. }&\$120,000\
\end{array}$
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: $\begin{array}{lr}
\text {Cash. }&\$18,000\
\text {Marketable securities }&\$24,000\
\text {Accounts receivable. }&\$39,000\
\text {Short-term notes receivable. }&\$0\
\text {Inventory. }&\$60,000\
\text {Prepaid expenses }&\$14,000\
\text {Current liabilities. }&\$120,000\
\end{array}$
 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, marketable securities, and accounts receivable by current liabilities. In this case, the acid-test ratio is ($18,000 + $24,000 + $39,000) / $120,000 = 0.68.

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