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Acid- Test Ratio

In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to immediately extinguish or retire its current liabilities. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values.

 

Generally, the acid test ratio should be 1:1 or better, however this varies widely by industry. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).

Formula

Acid Test Ratio = Current Assets - Inventory รท Current liabilities

Enter Current Asset Amount:

Enter Inventory Amount:

Enter Current Liabilities Amount:

This page uses content from the English Wikipedia. The content of Wikipedia is available under the GNU Free Documentation License.

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