Acid Test

Acid Test

The acid test ratio, commonly called the quick ratio, is a useful accounting metric used to measure a company’s ability to pay off all its current debts should they come due simultaneously.*

Short-term assets minus accounts receivable and inventory, divided by short-term liabilities. This is a test of a company’s ability to meet its immediate cash requirements. It is one of the more common business ratios used by financial analysts.**

*How can I calculate the acid test ratio in Excel … (n.d.). Retrieved from http://www.investopedia.com/ask/answers/012915/how-can-i-calculate-acid-test-rat
**Liquidity Ratios – WebHelp. (n.d.). Retrieved from http://www.hurdlebook.com/Content/Financial_Analysis/Finish_the_Financials/Business/

Synonyms:
working capital ratio
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