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Question
A firm submits their financial records to a bank. Upon examination, the bank discovers that this firm has $500 in cash, $2,500 in accounts receivables, $1,000 in inventory, $5,000 in plant and equipment and that their assets totaled $9,000. In addition this bank discovered that the firm had $2,000 in current liabilities, $2,500 in long-term debt, and $4,500 in net worth. Finally this bank discovered that this firm had $20,000 in net sales and $2,000 in net income. What is this firm's acid test ratio?
A. 1.00
B. 2.00
C. 0.33
D. 3.00
E. 1.50
Answer
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