What Is Acid-Test Ratio and How Do You Calculate It?

[Good-Person]

We know that handling liabilities is very important for a company. This is where the acid-test ratio plays a role. Acid-test ratio refers to company's assets that it may possess and its ability to pay the debts or liabilities. So, how is it calculated?

 

[Planbizzle]

The acid-test ratio, also referred to as the quick ratio, is a liquidity ratio that determines how well a business can cover its most liquid obligations. Divide the amount of current financial assets, marketable securities, and accounts receivable by the present liabilities to determine the acid-test ratio.

 

[Good-Person]

The acid-test ratio, also referred to as the quick ratio, is a liquidity ratio that determines how well a business can cover its most liquid obligations. Divide the amount of current financial assets, marketable securities, and accounts receivable by the present liabilities to determine the acid-test ratio.

I think that acid-test ratio is one of the most important things. It helps businesses to evaluate their financial position in the market and their ability to pay the debts.

 

[HK World]

The acid-test ratio, also known as the quick ratio or the liquidity ratio, is a financial metric used to measure a company's short-term liquidity. It indicates the company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.

The formula for calculating the acid-test ratio is:

Acid-Test Ratio = (Cash + Cash Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities

 

[Jonaville1]

The acid-test ratio, also referred to as the quick ratio, is a liquidity ratio that determines how well a business can cover its most liquid obligations. Divide the amount of current financial assets, marketable securities, and accounts receivable by the present liabilities to determine the acid-test ratio.

I never knew about this but I think your explanation is given me an insight to what it is and I will also check it online to know what exactly it is and how it works

 

[Kane]

The acid-test ratio, also referred to as the quick ratio, is a liquidity ratio that determines how well a business can cover its most liquid obligations. Divide the amount of current financial assets, marketable securities, and accounts receivable by the present liabilities to determine the acid-test ratio.

Never heard of this term, perhaps because I have never worked in a finance department in big corporation. Thanks for explaining this financial term in layman's words.