Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Quick (Acid Test) Ratio

Financial Accounting

14. Financial Statement Analysis

Ratios: Quick (Acid Test) Ratio

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Multiple Choice

The quick (acid-test) ratio is computed just like the current ratio, except that which of the following is omitted from current assets?

Inventory

Cash

Prepaid Expenses

Accounts Receivable

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Verified step by step guidance

Understand the concept of the quick (acid-test) ratio: It is a financial metric used to measure a company's ability to meet its short-term obligations using its most liquid assets, excluding inventory.

Review the formula for the quick (acid-test) ratio: Quick Ratio = (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities.

Identify the components of current assets: Current assets typically include cash, accounts receivable, inventory, and prepaid expenses.

Determine which items are excluded from current assets in the quick ratio calculation: Inventory and prepaid expenses are omitted because they are less liquid compared to cash and accounts receivable.

Apply the formula to calculate the quick ratio: Subtract inventory and prepaid expenses from current assets, then divide the result by current liabilities to compute the ratio.