| 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
: The acid test ratio in the company is___________
-
A.
1:1 -
B.
2:3 -
C.
1:2 -
D.
3:2
Correct Answer: Option A
Explanation
Acid test ratio measures the liquidity position of a company after deduction stock (inventory) from current assets
Formula: current assets less inventory/current liabilities
18000 – 4000/14000 = 1 : 1