Question

Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Best Digital, Corp. and Very Network, Inc. and have assembled the following data Your strategy is to invest in companies that have low pricelearnings ratios but appear to be in good shape financialy. Assume that you (Cck to view the income statement data.) Read the Data Table 囲(Click to view the balance sheet and market price data.) Requirement 1a. Compute the acid-test ratio for both companies for the current year Begin by selecting the formula to compute the acid-test ratio Acid-test ratio(Cash Short-term investments+Accounts receivable, net) Total current liabilities Now, compute the acid-test ratio for both companies. (Round your answers to two decimal places, XXX) Selected balance sheet and market price data at the end of the current year Best DigitalVery Network Current Assets: Cash Short-term Investments Accounts Receivables, Net Merchandise Inventory Prepaid Expenses Total Current Assets 18,000 14,000 49,000 102,000 12,000 195,000 28,000 S 37,000 38.000 67,000 19,000 189,000S Best Digital Very Network Acid-test ratio Data Table Total Assets Total Curent Liabilities Total Liabilities Common Stock, $1 par (13,000 shares) $2 par (17,000 shares) Total Stockholders' Equity 262,000 S 100,000 100,000 13,000 324,000 99.000 133,000 Selected income statement data for the current year Best Digital Very Network 34,000 Net Sales (all on credit) Cost of Goods Sold Interest Expense 423,035 S 493,845 260,000 14,000 162.000 191,000 212,000 Clear All Print Done

Answer 1

you have just posted the pic asking for acid test ratio ,in both pictures there is one ratio asked, here is your answer , for any disconnect kindly connect i will edit my answer ASAP

your selection of formula is correct

acid test ratio does not includes

inventory because are to be used in day to day business

prepaid expenses , no cash is to be received in exchange but you will get services

so the answer is

	Best digital	very network
AciD test ratio(a/b)	1.03	0.82

	Best digital	very network
Quick Assets
cash	28000	18000
short term investments	37000	14000
accounts receivable	38000	49000
total (a)	103000	81000
Total current liabilities(b)	100000	99000
Acid test ratio(a/b)	1.03	0.82