1. The quick ratio, measured by current assets less inventories divided by curre
ID: 2617644 • Letter: 1
Question
1. The quick ratio, measured by current assets less inventories divided by current liabilities, is also referred to as an "acid test" ratio and provides a measure of a company's ability to meet current obligations.
a. True b. False
2. Shorter-term cash budgets, in general, are used for actual cash control while longer-term budgets are used primarily for planning purposes.
a. True b. False
3. A just-in-time system of inventory control requires that manufacturers coordinate production with suppliers so that raw materials or components arrive just as they are needed in the production process. The main objective of such a system is to reduce carrying costs.
a. True b. False
Explanation / Answer
1. A. True.
The quick ratio, also known as acid test ratio, measures the liquidity of acompany. It calculates the proportion of a company's current assets to its current liabilities. The quick ratio is used to determine a company's ability to meet short-term obligations with liquid assets that can be easily converted intocash
2. A. True
Shorter-term cash budgets, in general, are used for actual cash control while longer-term budgets are used primarily for planning purposes
3. A. True
A just-in-time system of inventory control requires that manufacturers coordinate production with suppliers so that raw materials or components arrive just as they are needed in the production process. The main objective of such a system is to reduce carrying costs
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