FANDOM


Quick Ratio or Acid-Test Ratio is an important Financial ratios.

\mbox{Quick Ratio}/\mbox{Acid-Test Ratio} = \frac {\mbox{Quick Assets}} {\mbox{Current Liabilities}}

OR

\mbox{Quick (Acid Test) Ratio} = {\mbox{Current Assets} - \mbox{Inventory}\over \mbox{Current Liabilities}}

The Acid-test or quick ratio measures the ability of a company to use its "near cash" or quick assets to immediately extinguish its current liabilities. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. Such items are cash, stock investments, and accounts receivable. This ratio implies a liquidation approach and does not recognize the revolving nature of current assets and liabilities.

Compares a company's cash and short-term investments to the financial liabilities the company is expected to incur within a year's time.

Ideally the acid test ratio will be 1:1, but 0.8:1 is acceptable, any less and the business could suffer financial difficulties.

Discuss!Edit

Talk about everything related to Quick ratio in our wiki-based forum.





See alsoEdit

Current Ratio

External resourcesEdit

If you want to add personal links, please do that on your user page - you can also write your profile there. If you have a link with great content that persons using Finance Wikia need, you can add it at Quick ratio/Links

This page uses Creative Commons Licensed content from Wikipedia (view authors). Smallwikipedialogo.png

Ad blocker interference detected!


Wikia is a free-to-use site that makes money from advertising. We have a modified experience for viewers using ad blockers

Wikia is not accessible if you’ve made further modifications. Remove the custom ad blocker rule(s) and the page will load as expected.