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Acid-test ratio

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The following partial balance sheet ($ in thousands) for Paisano Seafood Inc. is shown below:

Current Assets
Cash - $60
Accounts receivable (net) - 170
Notes receivable - 50
Inventories - 200
Prepaid expenses - 25
Total current assets - 505
Plant assets (net) - 255

Total assets $760

Current Liabilities
Accounts payable - $240
Other liabilities - 80
Total current liabilities - 320
Long term liabilities - 110

Total liabilities - 430

Shareholders' equity
Capital Stock - 150
Retained Earnings - 180
Total shareholders' equity - 330

Total liabilities and equity - 760

What would the acid-test ratio be?

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Solution Preview

The following partial balance sheet ($ in thousands) for Paisano Seafood Inc. is shown below:

Current Assets
Cash - $60
Accounts receivable (net) - 170
Notes ...

Solution Summary

Solution assists in estimating acid-test ratio

$2.19
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Working Capital, Current Ratio, Acid Test Ratio, Return on Equity and Return on Investment

Analysis of liquidity and profitability measures of Motorola, Inc. The following summarized data (amounts in millions) are taken from the December 31, 1999 and 1998 comparative financial statements of Motorola, Inc., a manufacturer of wireless communication devices, semiconductors, and advanced electronic systems.

a) Calculate Motorola, Inc.'s working capital, current ratio, and acid-test ratio at December 31, 1999, and 1998.

b) Calculate Motorola's ROE for the years ended December 31, 1999, and 1998.

c) Calculate Motorola's ROI, showing margin and turnover, for the years ended
December 31, 1999, and 1998.

d) Evaluate the company's overall liquidity and profitability. Comment specifically on the difficulties you have encountered in evaluating ROI and ROE for 1998.

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