COST ACCOUNTING
FLEXIBLE BUDGETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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P 240, 000
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P 480, 000
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P 800, 000
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P 1, 200, 000
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Detailed explanation-1: -An acid-test ratio of 1.5:1 means that the company has $1.50 of liquid assets available to cover every $1.00 of current liabilities. This ratio indicates that the company is in a good position to cover its short-term obligations as they come due.
Detailed explanation-2: -When the current ratio is 2:1, an equal increase in current assets and current liabilities would decrease the current ratio.
Detailed explanation-3: -Current Ratio = 25, 000 ÷ 10, 000 = 2.5. The current ratio for Company ABC is 2.5, which means that it has 2.5 times its liabilities in assets and can currently meet its financial obligations Any current ratio over 2 is considered ‘good’ by most accounts.
Detailed explanation-4: -Therefore, current liabilities = 40, 000.