Knowee
Questions
Features
Study Tools

Using the following year-end information for Coachmen, LLC, calculate the acid-test ratio: Cash $ 44,210Short-term investments 9,800Accounts receivable 42,000Inventory 244,000Prepaid expenses 14,990Accounts payable 90,000Salaries payable 23,500Multiple Choice1.110.853.134.130.97

Question

Using the following year-end information for Coachmen, LLC, calculate the acid-test ratio: Cash $ 44,210Short-term investments 9,800Accounts receivable 42,000Inventory 244,000Prepaid expenses 14,990Accounts payable 90,000Salaries payable 23,500Multiple Choice1.110.853.134.130.97

🧐 Not the exact question you are looking for?Go ask a question

Solution

The acid-test ratio, also known as the quick ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. It is calculated as follows:

Acid-Test Ratio = (Cash + Short-Term Investments + Accounts Receivable) / Current Liabilities

Using the provided information, we can substitute the values into the formula:

Acid-Test Ratio = (Cash 44,210+Short−TermInvestments44,210 + Short-Term Investments 9,800 + Accounts Receivable 42,000)/(AccountsPayable42,000) / (Accounts Payable 90,000 + Salaries Payable $23,500)

Acid-Test Ratio = (44,210+44,210 + 9,800 + 42,000)/(42,000) / (90,000 + $23,500)

Acid-Test Ratio = 96,010/96,010 / 113,500

Acid-Test Ratio = 0.846

So, the closest answer would be 0.85.

This problem has been solved

Similar Questions

Calculate the acid-test ratio, assuming that cash + accounts receivable = $50,000, merchandise inventory = $10,000, noncurrent assets = $40,000, current liabilities = $20,000, noncurrent liabilities = $50,000, and stockholders' equity = $30,000. (Round your answer to one decimal place, if necessary.)Multiple choice question.0.70.92.53.0

The acid-test ratio is a measure of a company's:a.Liquidityb.Profitabilityc.Solvencyd.Efficiency

The acid-test (quick) ratio is more stringent than the current ratio because it excludes:Marketable securitiesInventoryAccounts receivableCash

Select all that applyWhich of the following statements are true regarding the acid-test ratio? (Choose every correct answer.)Multiple select question.Temporary cash investments are included in the numerator of the acid-test ratio.Accounts payable are included in the numerator of the acid-test ratio.The acid-test ratio uses the same denominator as does working capital.The acid-test ratio can be calculated as (Cash (including temporary cash investments) + accounts receivable) divided by current liabilities.The acid-test ratio is sometimes called the quick ratio.

An acid-test ratio between and 1.0 is usually considered satisfactory but could also be a sign of some cash flow problems.

1/2

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.