The acid-test ratio measures a company's ability to cover short-term liabilities with its most liquid assets. A ratio above 1 suggests good liquidity; below 1 indicates potential payment struggles.

The acid-test ratio and current ratio are two widely used ways to measure a company’s ability to meet short-term liabilities. They differ in how they define liquid assets.

The quick ratio, also known as the acid-test ratio, measures a company's ability to pay off its current debt. Current debt includes any liabilities coming due within a year, like accounts payable ...