ACCA Applied Knowledge · Management Accounting · Performance measurement - overview
A company has current assets of $450,000, of which inventory is $150,000, and current liabilities of $300,000. What is its quick (acid test) ratio?
The quick ratio is 1.0:1. Inventory of $150,000 is removed from current assets of $450,000, leaving $300,000 of liquid assets, which is divided by current liabilities of $300,000.
- A1.5:1
- B1.0:1Correct
- C0.5:1
- D3.0:1
Explanation
Quick ratio = (current assets - inventory) / current liabilities = (450,000 - 150,000) / 300,000 = 1.0. The 1.5 option is the current ratio, which does not exclude inventory.
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