QQuestionAccounting
QuestionAccounting
"The acid-test ratio is computed by dividing:
a. current assets by current liabilities
b. quick assets by current liabilities
c. long-term liabilities by current liabilities
d. stockholder's equity by current liabilities"
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Answer
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Step 1:I'll solve this accounting problem step by step:
Step 2:: Understand the Acid-Test Ratio Definition
The acid-test ratio (also called the quick ratio) is a liquidity measure that assesses a company's ability to pay short-term liabilities using its most liquid assets.
Step 3:: Identify the Components
- Quick assets include: - Cash - Marketable securities - Accounts receivable - These are the most liquid current assets that can be quickly converted to cash
Final Answer
Quick assets by current liabilities is the correct definition of the acid-test ratio.
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