KLM Corporation's quick assets are $5,888,000, its current assets are $11,700,000 and its current liabilities are $8,000,000. Its acid-test ratio equals:

Given:

Quick assets = $5,888,000

Current assets = $11,700,000

Current liabilities = $8,000,000

To find:

The acid-test ratio

Solution:

Acid-test ratio which is also known as the quick ratio is the measure of the liquidity of a business by representing its capacity to pay off the current liabilities with quick assets.

It is calculated by dividing the quick assets by current liabilities. Quick assets are generally short-term investments, cash equivalents, cash or current receivables.

On substituting the given values in the above formula we get,

Therefore, the acid-test ratio equals 0.74.

explanation:

what

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