Question

How do you determine the acid-test ratio? The sum of cash and short-term investments divided by short-term debt. Current assets divided by current liabilities. Current assets divided by short-term debt. The sum of cash, short-term investments and net receivables divided by current liabilities

Answer 1

Answer: The sum of cash, short-term investments and net receivables divided by current liabilities

Explanation: The acid test ratio, also known as the quick ratio, is a liquidity ratio that is used to determine the ability of a company to pay its current liabilities if it rises immediately. It is considered to be more stringent ratio than the current ratio.

It is concluded by dividing those current assets that can be converted into cash immediately with the current liabilities of the company.

Therefore, from the above we can conclude that the correct statement is D.