Question 5.2 -Acid Test or Quick Ratio

This ratio will help you measure the degree of liquidity for your company. The quick ratio compares the company's cash, cash equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio and the quick ratio is the quick ratio does not include inventory and prepaid expenses in the calculation. The company's quick ratio should be lower than its current ratio. It is a severe test of liquidity.

Enter the amounts, for all three periods, for the Cash, Accounts Receivable, Short-term investments and the Current Liabilities from your company's Balance Sheet. For each period, calculate the Acid Test Ratio using the following formula.

(Cash + Accounts Receivable + Short-term Investments) Current Liabilities

Enter the amounts in millions of dollars from the SEC Form 10K, for the current year, the previous year and the next previous year.Describe the trend direction for the Acid Test Ratio. Use phrases like: up only this year but level in previous years, consistently up, down only this year, consistently down or level for all years.Also, in your opinion is the trend positive, negative, insignificant?

Last, in your opinion, explain why the Acid Test Ratio for your company is or is not adequate for its future.

Disney

Question 5.2 - Acid Test or Quick Ratio
	Accounts	Current Yr	Previous Yr	Next Previous Yr	Industry Ratio
A	Cash
B	Accounts Receivable
	Short term investments
	Current Liabilities
C	Acid Test Ratio
D	Why is or is not the Acid Test Ratio adequate for your company?
E	Acid Test trend Description