19 A bank will only continue a credit line for one of its small business customers if the small business can keep an acid-test greater than 1. The company's reported current accounts are as follows: • Cash: $6,000 • Accounts receivable (net): $19,000 Inventory: $8,000 Short-term investment: $4,500 Current liabilities: $17,000 Which decision should the bank make? O Maintain the credit line because the acid-test ratio is 2.21. Close the credit line because the acid-test ratio is 0.45. O Close the credit line because the acid-test ratio is 0.58. Maintain the credit line because the acid-test ratio is 1.74. NEXT > BOOKMARK
19 A bank will only continue a credit line for one of its small business customers if the small business can keep an acid-test greater than 1. The company's reported current accounts are as follows: • Cash: $6,000 • Accounts receivable (net): $19,000 Inventory: $8,000 Short-term investment: $4,500 Current liabilities: $17,000 Which decision should the bank make? O Maintain the credit line because the acid-test ratio is 2.21. Close the credit line because the acid-test ratio is 0.45. O Close the credit line because the acid-test ratio is 0.58. Maintain the credit line because the acid-test ratio is 1.74. NEXT > BOOKMARK
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 23MC: Orion Rentals is unable to collect on a note worth $25,000 and has accumulated interest of $250. It...
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