A company reported the following year-end information: Cash..................................................... . $ 52,000 Short-term investments.............................. 12,000 Accounts receivable.................................... 54,000
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A company reported the following year-end information:
Cash..................................................... . $ 52,000
Short-term investments.............................. 12,000
Accounts receivable.................................... 54,000 Inventory............................................... .. 325,000
Prepaid expenses..................................... ..17,500
Accounts payable..................................... .. 106,500
Other current payables.............................. ..25,000
Required: (20’)
1. Explain the purpose of the acid-test ratio.
2. Calculate the acid-test ratio for this company.
3. What does the acid-test ratio reveal about this company?
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