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?

Question

Business

Aidan Martinez

21 March, 07:04

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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Answers (1)

Know the Answer?

Audi · Answer 1

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