ACCA Applied Skills · Performance Management · Performance analysis in private sector, public sector and not-for-profit organisations
Holm Co has current assets of $540,000, of which inventory is $210,000, and current liabilities of $360,000. Which of the following is the quick (acid test) ratio?
The quick ratio is 0.92. Inventory of $210,000 is excluded from current assets of $540,000, leaving $330,000, which is divided by current liabilities of $360,000. Including inventory would give the current ratio of 1.50 instead.
- A0.92Correct
- B1.50
- C0.58
- D1.08
Explanation
Quick assets = 540,000 - 210,000 = 330,000. Ratio = 330,000 / 360,000 = 0.92. The 1.50 figure is the current ratio, which includes inventory.
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