Question

When calculating the Acid Test Ratio, name two items that are excluded from current assets.

Answer 1

Two Items Excluded from Current Assets When Calculating the Acid-Test (Quick) Ratio:

1. Inventory: Inventory is excluded because it may be more difficult to convert into cash than other current assets.
2. Prepaid Expenses: These are payments paid in advance for goods or services that will be delivered in the future and cannot be simply converted into cash.