Which of the following is NOT a component of the acid-test ratio?
Practice Questions
Q1
Which of the following is NOT a component of the acid-test ratio?
Cash
Accounts receivable
Inventory
Marketable securities
Questions & Step-by-Step Solutions
Which of the following is NOT a component of the acid-test ratio?
Step 1: Understand what the acid-test ratio is. It is a financial metric that measures a company's ability to pay its short-term liabilities without relying on the sale of inventory.
Step 2: Identify the components of the acid-test ratio. The formula includes cash, cash equivalents, and accounts receivable.
Step 3: Recognize that inventory is not included in the acid-test ratio because it may not be quickly converted to cash.
Step 4: Conclude that since inventory is not part of the acid-test ratio, it is the correct answer to the question.
