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christina49668's Question
Math
Posted about 2 months ago
the ratio is 0.11,why we choose C 0.91

Acid test ratio ==
Curreı
(Hall et al., 2015
BR The Sino-British College, USST
上海理工大学中英国际学院
NCUK-IFYBSOO4
M48\mathrm{M}-48
\begin{tabular}{|l|l|l|l|} \hline 1819V1E-QA7 & MCQ [1] & SLO & IFYBS004-M4(23-24) \\ \hline \end{tabular}
The following information has been extracted from a company's statement of financial position. The information is incomplete
\begin{tabular}{|l|l|}
\hline Inventories & 100 \\
\hline Trade receivables & 70 \\
\hline Cash & 40 \\
\hline Trade payables & 90 \\
\hline Non-current liabilities & 30 \\
\hline
\end{tabular}

The value of the acid test ratio is:
\begin{tabular}{|l|l|l|l|}
\hline A & 1.75:11.75: 1 & B & 1.2:11.2: 1 \\
\hline C & 0.91:10.91: 1 & D & 2.3:12.3: 1 \\
\hline
\end{tabular}
SBC)
The Sino-British College, USST
上海理工大学中英国标学院
NCUK-IFYBS004
M49\mathrm{M}-49
(7) Acid test ratio
- If a business has an acid test ratio of less than 1:1 it means
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Answer from Sia
Posted about 2 months ago
Solution by Steps
step 2
From the given data: Current Assets = Trade Receivables + Cash = 70+40=11070 + 40 = 110
step 3
Inventories = 100100
step 4
Current Liabilities = Trade Payables = 9090
step 5
Substituting the values into the formula: Acid Test Ratio=11010090=1090=190.11\text{Acid Test Ratio} = \frac{110 - 100}{90} = \frac{10}{90} = \frac{1}{9} \approx 0.11
C
Key Concept
Acid Test Ratio
Explanation
The acid test ratio measures a company's ability to pay off its current liabilities without relying on the sale of inventories.

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