Answer (C) is correct . Liquidity ratios measure the ability of a company to meet its short-term obligations. A commonly used liquidity ratio is the acid test or quick ratio, which
Answer (A) is incorrect because Dividing total current liabilities ($12,000) by the amount of cash ($5,000) results in 2.4, which produces no meaningful ratio.
Answer (B) is incorrect because Dividing quick assets ($5,000 + $3,000 + $16,000) by accounts payable ($11,000) results in 2.18. The denominator should include all current liabilities.
Answer (D) is incorrect because Dividing total current liabilities ($12,000) by the sum of cash ($5,000) and short-term marketable investments ($3,000) results in 1.5, which produces no meaningful ratio.
|
RST’s acid test (or quick) ratio at the end of Year 6 is
