Calculate the acid test ratio?

Purchasers – #44,880
Sales – #85,850
Trade creditors – #12,250
Trade debtors – #24,000
Accrued expenses – # 350
Prepaid expenses – # 700
Stock 1/1/2006 – #25,120
Stock 31/12/2006 – #27,840

A. 1:94:1
B. 1:96:1
C. 1:1:94
D. 1:1:96

Correct Answer:

Option B – 1:96:1

Explanation

Acid test ratio = cash + cash equivalents + marketable securities + current accounts receivables / Total current liabilities