ACCA MA · Chapter 14 · Question 7 of 11
A company has inventory of $80,000, trade receivables of $120,000, cash of $20,000 and current liabilities of $110,000. What is its quick (acid test) ratio?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 1.27 : 1
Explanation
Quick ratio = (current assets - inventory) / current liabilities = (120,000 + 20,000) / 110,000 = 140,000 / 110,000 = 1.27 : 1. Including inventory gives the current ratio of 220,000 / 110,000 = 2.00 : 1.
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