https://file.aiquickdraw.com/mathbot/file/1728867775505gcgtx5ho.jpg

To determine the acid-test ratio (also known as the quick ratio) for this balance sheet, we need to calculate it using the formula:

\[
\text{Acid-Test Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}
\]

### Step 1: Identify Quick Assets
Quick assets include cash, accounts receivable, and other assets that can be quickly converted to cash. Inventory is excluded as it is not considered a quick asset. From the provided dataTo determine the acid-test ratio (also known as the quick ratio) for this balance sheet, we need to calculate it using the formula:

\[
\text{Acid-Test Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}
\]

### Step 1: Identify Quick Assets
Quick assets include cash, accounts receivable, and other assets that can be quickly converted to cash. Inventory is excluded as it is not considered a quick asset. From the provided 

- Cash: $8,000
- Accounts Receivable: $22,000

**Total Quick Assets:**
\[
8,000 + 22,000 = 30,000
\]

### Step 2: Identify Current Liabilities
Current liabilities are short-term debts due within one year, which include accounts payable, wages payable, and other similar obligations. In this case:

- Accounts Payable: $15,000
- Wages Payable: $5,000

**Total Current Liabilities:**
\[
15,000 + 5,000 = 20,000
\]

### Step 3: Calculate the Acid-Test Ratio
\[
\text{Acid-Test Ratio} = \frac{30,000}{20,000} = 1.5
\]

Thus, the acid-test ratio at December 31, 2022, was **1.5**.

Would you like further details or have any questions?

Here are some related questions to explore further:
1. What does an acid-test ratio of 1.5 indicate about a company's liquidity?
2. How does the acid-test ratio differ from the current ratio?
3. Why is inventory excluded from the acid-test ratio?
4. What other ratios are useful for evaluating a company's short-term financial health?
5. How does the acid-test ratio affect a company's ability to secure loans?

**Tip:** A higher acid-test ratio generally indicates better liquidity, showing the company's ability to meet short-term obligations without selling inventory.

The following amounts were reported on the December 31, 2022 balance sheet. The acid-test ratio at December 31, 2022 was?

Learn how to calculate the acid-test ratio using the balance sheet provided for December 31, 2022. This covers key financial concepts such as quick assets and current liabilities.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation