Acid test ratio
Acid test ratio
Glossary of business
Definition of acid test ratio
The acid test or quick ratio is the current ratio with stock and work-in-progress deducted from current assets. It is considered to be a better measure of short-term liquidity than the current ratio as it recognises that stock can be a difficult asset to realise quickly. It is often said that the value of the acid test ratio should be greater than one to ensure that the firm can meet all their short-term liabilities from liquid current assets, but the exact preferred value will depend on the particular industry.
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Terminology about business
Job world
Definition and meaning of acid test ratio
Meaning of acid test ratio
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