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The following summarised statement of financial position is available for L, a limited liability company:
Non-current assets $31,250
Current Assets
Inventory $35,000
receivables $40,000
cash $1,250
total $76,250Equity and liabilities
capital and reserve $67,500
current liabilities ( payables only) $60,000
total $107500what is the acid test ratio?
A. 0.6875 B.0.7093 C.1.2708 D.2.0 ( correct answer is A)my working :
the ratio of current assets less inventories / current liabilities76250 – 35000 / 60000 = 0.6875 my answer is A
Sir, may i know to less inventory because the total CA is included costs of inventory therefore need to exclude it ?
if my working as the following is the same concept?
40000 + 1250 / 60000 = 0.6875thank you
It does not matter which way you do your workings (workings are not looked at in the marking – only the answer).
Since for the acid-test ratio, the top figure is “current assets less inventories” that is always exactly the same as the “total of all current assets except for inventories”.
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