Concept #1: Ratios: Quick (Acid Test) Ratio

Practice: The following table contains selected financial information for Tougher Question, Inc.

Calculate the quick ratio for TQ, Inc.

The acid-test (quick) ratio
a. is used to quickly determine a company's solvency and long-term debt paying ability.
b. relates cash, short-term investments, and net receivables to current liabilities.
c. is calculated by taking one item from the income statement and one item from the balance sheet.
d. is the same as the current ratio except it is rounded to the nearest whole percent.

Which of the following is true about the quick ratio?
a. It is a liquidity ratio.
b. It cannot exceed the current ratio.
c. It is also called the acid-test ratio.
d. It measures the ability of the firm to pay off its short-term obligations without relying on inventory.
e. All of the above answers are correct.

What is the acid-test (quick) ratio for this company?
a. 0.67
b. 1.08
c. 1.00
d. 1.42