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6 November, 02:15

Atâ year-end, Snowâ, Inc. has cash of $ 15,000â, current accounts receivable of $ 30,000â, merchandise inventory of $ 40,200â, and prepaid expenses totaling $ 4,500. Liabilities of $ 60,000 must be paid next year. What is Snow's âacid-test ratio?

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  1. 6 November, 03:34
    0
    0.75 times

    Explanation:

    The formula and the calculation of acid test ratio is presented below

    Acid test ratio = Quick assets : total current liabilities

    where,

    Quick assets = Cash + current accounts receivable

    = $15,000 + $30,000

    = $45,000

    And, the current liabilities is $60,000

    So, the acid test ratio would be

    = $45,000 : $60,000

    = 0.75 times
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