The relationship between liquid assets (current assets less inventories) and current liabilities. Acid test is a measure of liquidity.
is a stricter indication than the current ratio of a firm's ability to meet its obligations and expand its business. It is calculated by subtracting inventories from current assets and dividing that into total current liabilities. Page 329
An indicator of a company's financial strength. Calculated by taking current assets less inventories, divided by current liabilities.
The ratio achieved by dividing Current Assets (excluding stocks) by Current Liabilities. It tells us if the organisation has sufficient funds to pay off its debts immediately.
The ratio of current assets excluding inventories to current liabilities.
A measure of Liquidity. It compares the sum of a company's cash and debtors and those securities that are readily convertible into cash with its current liabilities. This ration differs from the working capital ratio that it disregards stock (inventories). If the ratio is to high, then this indicates idle funds which could be better employed, if it is to low then this gives a warning sign as to a potentially dangerous situation. See also Liquid Asset Ratio.
Measures ability to meet current debt. This is a stringent test since it discounts the value of inventories. Cash and near-cash divided by current liabilities. A rule of thumb is one to one. A lower ratio indicates illiquidity. A higher ratio may indicated unused funds.
Acid Test is a ratio of the ready-cash items like cash, accounts receivable, and marketable securities, to the current liabilities of a company. Acid Test ratio is a test of a company's ability to meet its immediate cash requirements. A higher ratio of re
A liquidity measure that compares a business's most liquid current assets to total current liabilities (cash & equivalents + receivables / total current liabilities). It is also known as the quick ratio because cash and debtors are regarded as 'quick assets', ie, they are cash or near cash.
Provides a measure of the company’s financial strength or weakness. Calculated by taking current assets less inventories, divided by current liabilities. Sometimes known as the Quick Ratio.
The ratio between current assets (less any inventory) and current liabilities as shown on the balance sheet; the quick ratio. This test provides some indication of liquidity.
The Acid Test often appears in business balance sheets to determine the ability of the business to pay its debts. The Acid Test is one of the most used liquidity ratios in business, as well as the current ratio.