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Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory.The acid-test (quick) ratio is:
A) 1.4 : 1.
B) 0.77 : 1.
C) 0.54 : 1.
D) 1 : 1.
E) 0.64 : 1.
Acid-test Ratio
A financial ratio that measures a company’s ability to pay off its short-term liabilities with its quick assets, offering insight into financial stability.
Current Assets
Assets that are expected to be converted into cash, sold, or consumed within a year or within the normal operating cycle of a business.
Current Liabilities
Debts or obligations of a company due within a fiscal year or the operating cycle, whichever is longer.
- Evaluate the financial status by calculating and analyzing critical ratios, including the acid-test ratio, current ratio, and accounts receivable turnover.
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Learning Objectives
- Evaluate the financial status by calculating and analyzing critical ratios, including the acid-test ratio, current ratio, and accounts receivable turnover.
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