Question

The acid test ratio inventory is excluded from current assets but accounts receivables are not why accounts receivables are

Answer 1

Answer:

Acid test ratio is analysing the liquidity of an organisation, how it recoup its current liability with its current assets.

Inventory in an organisation has a material value compared to other current assets.

Receivable would extracted from inventory and before an organisation working capital can be favourable its must reduce it receivable to the bearest minimum.

Therefore acid test ratio is just based on without the inventory can current assets recoup current liability

Explanation: