Answer:
The correct answer is 0.59 : 1.
Explanation:
According to the scenario, the given data are as follows:
Cash = $1,340
Prepaid expenses = $600
Accounts receivable = $2,023
Accounts payable = $5,100
Inventory = $4,300
Other current liabilities = $600
So, we can calculate Quick ratio by using following formula:
Acid Test Ratio = Quick Assets / Current Liabilities
Where, Quick Assets = Cash and cash equivalents + Marketable securities + Accounts receivable
= $1,340 + $2,023
= $3,363
And Current liabilities = Accounts payable + Other current liabilities
= $5,100 + $600
= $ 5,700
So, by putting the value in the formula, we get,
Acid Test Ratio = $3,363 / $5,700
= 0.59
Hence, the acid test ratio is 0.59 : 1
