|Capital 39,000||Land 20,000|
|Long Term Loan 15, 000||Building 30,000|
|Creditors 9,000||Stock 40,000|
|Accrued wages 5,000||Cash 8, 000|
Use the information above to answer the question
What is the acid test ratio in the company?
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
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