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Recall the formula for calculating a company's acid-test ratio.

A. Merchandise inventory divided by Total assets
B. Current assets divided by Total assets
C. (Cash plus Short-term investments plus Current receivables plus Inventory) divided by Current liabilities
D. (Cash and cash equivalents plus Short-term investments plus Current receivables) divided by Current liabilities

Sagot :

GinnyAnswer
To determine the correct formula for calculating a company's acid-test ratio, let's break down each option and find the appropriate one:

1. Merchandise inventory divided by Total assets:
- This formula does not relate to the acid-test ratio. It calculates the proportion of inventory relative to the total assets.

2. Current assets divided by Total assets:
- This formula gives the proportion of current assets relative to the total assets, which is not the acid-test ratio.

3. (Cash plus Short-term investments plus Current receivables plus Inventory) divided by Current liabilities:
- This formula includes inventory in the calculation, which is a deviation from the acid-test ratio. Including inventory reflects the current ratio, not the acid-test ratio.

4. (Cash and cash equivalents plus Short-term investments plus Current receivables) divided by Current liabilities:
- This is the correct formula for the acid-test ratio. It excludes inventory, focusing on the most liquid assets that can quickly cover current liabilities.

The acid-test ratio measures a company's ability to meet its short-term obligations with its most liquid assets. Therefore, the correct formula for the acid-test ratio is:

(Cash and cash equivalents plus Short-term investments plus Current receivables) divided by Current liabilities

Given this, the correct option is:
- (Cash and cash equivalents plus Short-term investments plus Current receivables) divided by Current liabilities
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