Response to the following problem:
Use the following information on current assets and current liabilities to compute and interpret the acidtest ratio. Explain what the acid-test ratio of a company measures.
Cash . . . . . . . . . . . . . . . . . . . . $1,200
Prepaid expenses . . . . . . . . . . . . . $ 600
Accounts receivable . . . . . . . . 2,700
Accounts payable . . . . . . . . . . . . . 4,750
Inventory . . . . . . . . . . . . . . . . . 5,000
Other current liabilities . . . . . . . . 950