Use the information below to answer this question.

\(\begin{array}{c|c}

\text{Stock} & 11,250 \\

\hline

\text{Debtors} & 18,750 \\

\hline

\text{Creditors} & 3,750 \\

\hline

\text{Bank} & 4,000 \\

\hline

\text{Net profit} & 7,500 \\

\hline

\text{Net} & 60,000 \\

\end{array}\)

Calculate the acid test ratio

  • A 5 : 1
  • B 6 : 1
  • C 6 : 1 : 1
  • D 4 : 1
jamb 2015accounting

The correct answer is C. 6 : 1 : 1

given that acid test ratio is:

\(\frac {\text{Current assets – stock}}{\text{Current liabilities}}\)

Current assets:\(\frac {\text{stock + Debtors + bank – stock}}{\text{Current liabilities}}\)

\(\frac{11250 + 18750 + 4000 – 11250}{3750}\)

= 34000 – 11250 = 22750 = 6:1:1

Previous question Next question