| N | N |
| Capital 39,000 | Land 20,000 |
| Long Term Loan 15, 000 | Building 30,000 |
| Creditors 9,000 | Stock 40,000 |
| Debtors 6,000 | |
| Accrued wages 5,000 | Cash 8, 000 |
| 68,000 | 68,000 |
Use the information above to answer the question
What is the acid test ratio in the company?
A 1:1
B 2:3
C 1:2
D 3:2
Answer is A
Acid test ratio: This is a measure of the liquidity position of a company after deduction stock from current assets
Here is the formula: current assets less inventory/current liabilities.
Hence, 18000 – 4000/14000 = 1 : 1
