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Acid test ratio: Acid test ration is also called Quick ratio. This ratio is calculated by dividing the quick assets (Cash, Cash equivalents, Short term investments and current receivables) by total current liabilities for the year. The formula for Acid test ratio is as follows:
To calculate: The current ratio and acid test ratio for each company.
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Chapter 4 Solutions
Connect Access Card for Financial Accounting: Information and Decisions
- Give examples of Gearing Ratios from a company's financial statement, and how such gearing ratios are computed, and interpreted. As many gearing ratios as possible.arrow_forward5.) For each definition, list the “ratio category (or grouping)” that is described by filling in the blanks from (a) to (f) and provide one example for each category or grouping. a) Determines a company’s ability to pay off short term obligations or debts as they come due. ________________________ b) Relates company’s internal performance to the external judgment of the marketplace in terms of what it is worth. ________________________ c) Identifies percentage of earnings paid out to shareholders and what is reinvested for internal growth. ________________________ d) Speed at which company turns over its inventory, receivables and long-term assets. ________________________ e) How a company is financed between debt [lenders] and equity [owners]. ________________________ f) Measures return on sales, assets and total capital. ________________________arrow_forwardQ2: MULTIPLE-CHOICE QUESTIONS – Financial Ratios Analysis 1- In order to assess a company's ability to fulfill its long-term obligations, an analyst would most likely examine: A. activity ratios. B1. Solvency ratio ç. liquidity ratios.arrow_forward
- Required: Evaluate the performance of RBL Paving Company using the below ratios. Define each ratio, perform the calculation, and provide an explanation of the result. a. Return on equityb.Total assets turnoverc. Return on assetsd. Current ratioe. Receivables turnoverarrow_forwardOBIECTIVES: I. Identify the elements of the SCI and describe each of these items for service business and merchandising business II. TOPIC: STATEMENT OF COMPREHENSIVE INCOME III. Direction: A. Write the correct word or words to complete the statement. 1. An example for this is gain or losse on hedging derivatives. 2.An approach used on preparing statement of comprehensive income that shows expense by its nature. 3.An increases in economic benefits during the period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity. 4.This occurs when revenue is less than expenses. 5.lt arises in the course of the ordinary activities of a business and is referred to by a variety of different names including sales, fee, interest, and etc. 6. The difference between an Income Statement and SCI ... 7. The nature of business for a single step statement of comprehensive income 8. The nature of business for a multi-step…arrow_forwardAccounting calculate return on assest for this statementarrow_forward
- Below are three ratios introduced in your text. Describe the purpose for each of them, and also state the formula for calculating them: a. Revenue Per Employee Ratio: b. Quick Ratio: c. Fixed Assets Ratio:arrow_forwardWhich of the following ratios is used by the company to determine its ability to pay currently maturing obligations? a. Cash Ration b. Interest Coverage Ratio c. Equity Ratio d. Accounts Receivable turnoverarrow_forwardMatch the following terms Question 1 options: benchmarking analysis ratio analysis solvency liquidity 1. refers to a company's ability to pay its short-term financial obligations 2. refers to a company's ability to pay its long-term financial obligations 3. compares a company's performance, or a ratio , to that of its competitors, or to an industry average 4. expresses the relation of one relevant accounting number to another relevant accounting number through the process of divisionarrow_forward
- Which of the following ratios is always the lowest? a. The net profit margin b. The gross profit margin c. The operating margin d. The EBITDA ratioarrow_forwardThe accounting principle upon which deferrals and accruals are based is Oa. conservatism Ob. matching Oc. price-level adjustment Od. costarrow_forwardIn a restated set of financial statements prepared in accordance with the current cost accounting, how much would appear as Total liabilities and shareholders' equity?arrow_forward