[Biff-1955-Tannen]

Have I been thought the wrong ratios my entire time in college, and is every website that I double check with wrong?

Somebody please explain why there are little variations of ratios that these questions use, that are different from what is normally used. For example, why am I using only A/P and not CL for the denominator??

A company has cash of $100 million, accounts receivable of $600 million, current assets of $1.2 billion, accounts payable of $400 million, and current liabilities of $900 million. What is its acid-test (quick) ratio?

I remember there is an AUD sim that you need to calculate ROA I believe, and in the answer it takes net income + interest expense for the numerator… Instead of just net income

For “consistency” being a huge part of accounting, they sure don’t like to apply that for exams.

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Tripin93]

Disclaimer: I haven't studied for BEC yet and I am not claiming to know the answer. But, is it possible that for some questions the A/P was broken down into a current portion and a noncurrent portion? If my memory serves correct, I believe that the quick ratio is for current amounts only. That would explain why one question used A/P, but another question did not.

Biff, I've been seeing you a lot on here lately. I wish you the best on your studies! Where are you located? I'm in Kansas.

Motivated by JC. I do it to make God proud.

FAR: 91 July 2015
AUD: 83 October 2015
REG: 81 January 2016
BEC: 83 February 2016

[Tripin93]

Also, I memorized the ratios for FAR and AUD (and now I'm fuzzy/unrefreshed.) But one way I memorize when to use net income vs. revenue/sales was that if the ratio included the word “return,” that meant use net income. If it says “turnover,” use revenue (except use COGS for inventory turnover ratio.) There may be slight modifications to it, for example, you may need to use “net sales” or add back interest expense or taxes. But that word association has never failed me. Do you like flashcards? Flash cards made it very easy for me to memorize all of this. I made the flash cards for FAR. Saved them for AUD. And in still saving them for BEC.

Motivated by JC. I do it to make God proud.

FAR: 91 July 2015
AUD: 83 October 2015
REG: 81 January 2016
BEC: 83 February 2016

[Biff-1955-Tannen]

Thanks for the reply. I'm in Minnesota

I don't think separating the current portion of a LT liability is the issue here. I've always been taught that the quick ratio is going to be your cash & cash equivalents divided by Current Liabilities. But for this question, it has us using only accounts payable (which is only a portion of your current liabilities) as a denominator instead of total current liabilities.

PS I envy your scores

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Tripin93]

Haha thanks Biff. I was shocked by my scores, but I attribute it to the man upstairs. When I started, I wasn't focused on becoming a CPA. After being out of college for 3 years, I felt like God wanted me to take FAR. So I only focused on that. When I saw that I scored well, I decided to keep going, one step at a time.

I just dug out my old flash cards and I see a different formula for the quick ratio and acid-test ratio. Do you have an answer key? It would be nice if we could reconcile this somehow (to test out my flashcards and help you learn formulas!)

Current ratio = current assets / current liabilities

Acid-test ratio = (cash + marketable securities + net receivables) / current liabilities

For your problem, current would equal 1.3 and acid would equal 0.77.

Motivated by JC. I do it to make God proud.

FAR: 91 July 2015
AUD: 83 October 2015
REG: 81 January 2016
BEC: 83 February 2016

[Tripin93]

I don't know if this helps or not, but I made my flash cards based the info from Becker.

Motivated by JC. I do it to make God proud.

FAR: 91 July 2015
AUD: 83 October 2015
REG: 81 January 2016
BEC: 83 February 2016

[Tripin93]

You know what? Before I didn't thoroughly read your response. A/P ($400 million) is the denominator in your answer key?? What brand of study materials are you using? I'm not sure what to make of this one. {Que in a candidate whose actually passed BEC.}

Motivated by JC. I do it to make God proud.

FAR: 91 July 2015
AUD: 83 October 2015
REG: 81 January 2016
BEC: 83 February 2016

[Biff-1955-Tannen]

>_< well now I look like an idiot. The answer is .78

I had what they used as the denominator backwards. They did use the CL of 900m, I thought they used the A/P.
The A/P of 400m is included in the 900m, not separate. They just put it in there to confused you, which they have succeeded with me.

Thanks again for the help. I just need to learn to read now.

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Tripin93]

Have no shame. We all do this 🙂

Motivated by JC. I do it to make God proud.

FAR: 91 July 2015
AUD: 83 October 2015
REG: 81 January 2016
BEC: 83 February 2016

[Author]

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