Calculate the Acid Test Ratio - Leaving Cert Business - Question 10 - 2022

First, we calculate the Current Assets minus the Closing Stock:

Current Assets = €160,000 Closing Stock = €40,000

$\text{Current Assets} - \text{Closing Stock} = €160,000 - €40,000 = €120,000$

Next, we consider the Current Liabilities, which is:

Current Liabilities = €100,000

Now, we can substitute these values into the Acid Test Ratio formula:

$\text{Acid Test Ratio} = \frac{€120,000}{€100,000} = 1.2$

Thus, the Acid Test Ratio is 1.2 : 1.