At year-end, Stick Company has cash of $ 15 comma 000 , current accounts receivable of $ 30 comma 000 , merchandise inventory of $ 40 comma 200 , and prepaid expenses totaling $ 5 comma 900. Liabilities of $ 60 comma 000 must be paid next year. What is Stick's acid-test ratio?

Question

Business

Chace Esparza

25 June, 12:18

At year-end, Stick Company has cash of $ 15 comma 000 , current accounts receivable of $ 30 comma 000 , merchandise inventory of $ 40 comma 200 , and prepaid expenses totaling $ 5 comma 900. Liabilities of $ 60 comma 000 must be paid next year. What is Stick's acid-test ratio?

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Answers (1)

Know the Answer?

Nash Richard · Answer 1

0.75 times

Explanation:

The computation of the acid test ratio is shown below:

Quick ratio = Quick assets : total current liabilities

where,

Quick assets = Account receivable + cash balance

= $30,000 + $15,000

= $45,000

And, the current liabilities is $60,000

Now put these values to the above formula

So, the value would equal to

= $45,000 : $60,000

= 0.75 times