Business FinancesQuestion 497 of 690
A contractor has current assets of $240,000 (including $60,000 in inventory and $20,000 in prepaid expenses) and current liabilities of $100,000. What is the quick (acid-test) ratio?
a.2.40
b.1.60
c.1.80
d.2.20
Explanation
Quick ratio = (Current Assets − Inventory − Prepaid Expenses) ÷ Current Liabilities = ($240,000 − $60,000 − $20,000) ÷ $100,000 = $160,000 ÷ $100,000 = 1.60. The quick ratio is stricter than the current ratio because it removes assets that cannot be converted to cash quickly.
Practice all 690 questions free — no signup required.
Related questions on this topic
- A contractor's fixed overhead is $9,000 per month and variable costs are 75% of revenue. If the contractor produces $30,000 of revenue in a month, what is the net result for that month?
- A contractor purchases materials on 30-day terms with a 2% discount if paid within 10 days. On a $20,000 invoice, how much is saved by paying within 10 days?
- A contractor's job came in with actual costs of $88,000 against an estimate of $80,000, while the contract price stayed at $95,000. The MOST useful lesson from this job cost comparison is that:
- When is the quick ratio more meaningful than the current ratio for a construction company?
- A contractor has annual credit sales of $1,825,000 and an average accounts receivable balance of $250,000. What is the Days Sales Outstanding (DSO)?
- A contractor's annual cost of goods sold is $1,460,000, average accounts payable is $200,000, and average inventory turns are 36 days. What is the Days Payable Outstanding (DPO)?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California CSLB Contractor License Law & Business Exam · How we review