Acid test ratio

From CNM Wiki
Revision as of 13:39, 15 July 2020 by EshwaN (talk | contribs)
Jump to: navigation, search

Acid test ratio (alternatively known as quick ratio) is 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.


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

Related lectures