Answer (A) is correct . The acid test, or quick, ratio is calculated by dividing total quick assets by current liabilities. Quick assets are those that can be quickly converted into cash. Besides cash, they include trading securities and accounts receivable. Lisa’s quick assets total $95,000 ($30,000 + $20,000 + $45,000). Dividing $95,000 by the $85,000 of current liabilities results in a ratio of 1.1.
Answer (B) is incorrect because Erroneously including inventories in the numerator results in 1.8.
Answer (C) is incorrect because The ratio 2.0 is obtained by dividing total current assets by total current liabilities.
Answer (D) is incorrect because The quick ratio must be less than the current ratio.
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Lisa, Inc.’s acid test (quick) ratio at December 31, Year 2, was
