A company could improve its acid-test ratio by selling some equipment it no longer needs for cash. a. True b. Flase

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Business

Lauryn Downs

2 November, 18:25

A company could improve its acid-test ratio by selling some equipment it no longer needs for cash. a. True b. Flase

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Ace Sherman · Answer 1

true

Explanation:

acid test ratio can be calculate by (Current assets - Inventory) / Current liabilities. Ideally, the acid test ratio should be 1:1 or higher, however this varies widely by industry. In general, the higher the ratio, the greater the company's liquidity. by selling up equipment in exchange of cash, the will assist the company to be able to handle its current liability with the cash injection into the entity.