Business Ratios Interview Question:

How to illustrate the difference between the current ratio and the acid test ratio?

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To illustrate the difference between the current ratio and the acid test ratio, let's assume that a company has current liabilities of $50,000 and has the following current assets:
★ Cash and cash equivalents $5,000
★ Short-term marketable securities $10,000
★ Accounts receivable, net $25,000
★ Inventory $56,000
★ Prepaid expenses $4,000
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