Subscribe Us

header ads
header ads

What Is an Acid Test?

 An acid check is a business’s quick-term belongings minus accounts receivable and inventory, divided by way of quick-time period liabilities.

  • The acid-test, or quick ratio, compares a company's most short-term assets to its most short-term liabilities to see if a company has enough cash to pay its immediate liabilities, such as short-term debt.
  • The acid-test ratio disregards current assets that are difficult to liquidate quickly such as inventory.
  • The acid-test ratio may not give a reliable picture of a firm's financial condition if the company has accounts receivable that take longer than usual to collect or current liabilities that are due but have no immediate payment needed.

What Is an Acid Test

This is a check of a corporation’s capacity to meet its instantaneous cash necessities. It is one of the more common commercial enterprise ratios utilized by economic analysts.

Eternal Source: 

1. Investopedia

Post a Comment