Acid test ratio
Acid test ratio (alternatively known as quick ratio) is the secondary of two liquidity ratios; those assets that are most easily converted to cash are divided by current liabilities to indicate ability to pay off short-term debt.
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Acid test ratio. A liquidity ratio; those assets that are most easily converted to cash are divided by current liabilities to indicate ability to pay off short-term debt. Also called quick ratio.
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Quick ratio (acid test ratio). Found by taking current assets less inventories and then dividing by current liabilities.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Quick ratio (acid test ratio). This ratio is calculated by deducting inventories from current assets and then dividing the remainder by current liabilities.
According to Managerial Accounting by Braun, Tietz (5th edition),
- Quick ratio. Ratio of the sum of cash plus short-term investments plus net current receivables to total current liabilities. It tells whether the entity can pay all its current liabilities if they come due immediately; also called the acid-test ratio.
Related concepts
- Accounting (alternatively known as accountancy) is management of financial data, information, and knowledge about financial transactions of legal entities. Accountancy tends to include bookkeeping and, depending on a particilar enterprise, may also include quatitative analysis of financial data in the bookkeeping system and/or business intelligence.
