It is seen as more useful than the often-used current ratio since the acid test excludes inventory, which can be hard to liquidate quickly. In the best-case scenario, a company should have a ratio ...

Because of this distinction, the current ratio is often a higher number than the acid-test ratio, especially for companies with significant inventory holdings. Businesses in industries like ...

The quick ratio, also known as the acid-test ratio, measures a company's ability ... They should double-check the numbers they use to calculate the quick ratio. For example, the dollar amount ...

Whether called the quick ratio or the acid-test ratio, the result is the same: A number that tells you how many times the company can cover current liabilities with cash, cash equivalents ...

There are a number of financial ratios ... measure liquidity are the current ratio and the quick ratio. Of these two, the quick ratio, also known as the acid test, is the conservative measure.

For an example of how this calculation works, consider a company with $50,000 in cash, $20,000 in marketable securities, ...

The acid-test ratio is best used for businesses that are struggling, distressed, or facing a unique economic shock. If a business faces the threat of bankruptcy or liquidity concerns, investors ...