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Acid-test ratio

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Acid-test ratio
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Sayed Arif
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Acid-test ratio - December 10th, 2013

what is acid-test ratio ?discuss acid-test ratio in detail?
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Re: Acid-test ratio - December 10th, 2013

The acid-test ratio is a measure to reflect whether the company has sufficient assets to meet its short-term liabilities without selling off its inventory. It is also referred to as quick ratio and its only difference from the current ratio is that inventories are removed from the current assets.
Mathematically, it is calculated as:
Formula:

A value of over 1 suggests that the firm is in a position to meet its liabilities. A large variation of the acid test ratio from the current ratio implies that the assets of the firm are strongly dependent on the inventory.

Example
Assets Liabilities
Cash = 1000 Accounts payable = 500
Accounts receivable = 1000 Other short-term liabilities = 500
Inventory = 200
Current assets = 2200 Current Liabilities = 1000

Acid test ratio = (2200-200)/1000 = 2
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Re: Acid-test ratio - April 20th, 2016

Quote:
Originally Posted by sayed123 View Post
what is acid-test ratio ?discuss acid-test ratio in detail?
Hey friend,

Here I am up-loading Notes on Acid-test ratio, please check attachment below.
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File Type: pdf Notes on Acid-test ratio.pdf (91.1 KB, 0 views)
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