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Acid-test or Quick Ratio measures the ability of a company to use its cash or near cash assets to extinguish or pay-off its current liabilities immediately. Near cash assets are those that can be quickly converted to cash at close to their book values.
Formula:
ATR = (Current Assets - (Inventories + Prepayments)) / Current Liabilities
A company with a quick ratio of less than 1 cannot currently pay-off all its current liabilities. Any good company would want to maintain their acid test ratio to be greater than 1 at all times.
Wiki User
∙ 12y ago
Wiki User
∙ 14y agoThe acid test was a method used by the gold miners to confirm that their nuggets were real gold. Most metal will fail the test, but gold does not dissolve when emerged in acid. This phrase is now used for a company stock.. so a reading on the quick acid test of lest that one indicates a company has failed it or will not have enough cash or quick assets to cover their short term liabilities..
Wiki User
∙ 11y agoIt is called the acid test because in 1913 there was an acid rain storm that hit Dr. Wonton when he was discovering the quick ratio.
Wiki User
∙ 11y agoAnother name for the acid test ratio is the
Wiki User
∙ 9y agoAnother name of acid test ratio is "Quick Assets ratio".
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Should an acid-test ratio increase or decrease?
ok
Disadvantages of high acid test ratio?
carl is a semi-kin
Why is uric acid called a acid?
Because it is an acid. A way to test if a material is an acid or a base is to test it with litmus if the litmus turns red then it is acid if it turn blue it is a base or alkaline. uric acid turn litmus red. making it an acid.
What acid do you use for the acid test?
what acid do you use to test gold
What is the measurement called when measuring acid?
pH test. And the measurement is the pH value
300000 current assets 100000 current liabilities and inventory of 150000 what is the acid test ratio?
acid test ratio = quick assets / current liabilitiesacid test ratio = 150000 / 100000acid test ratio = 150 %
Another name for the acid test ratio is?
Other names are the quick ratio ot the liquid ratio
The acid test ratio does not include?
acid test / quick ration = quick assets / quick liablities quick assets = current assets - stock- prepaid expenses quick liablities = current liablities - bank overdraft
What are some types of liquidity ratios?
current and quick ratios. The quick (acid test) ratio is a more accurate measure of liquidity because it excludes inventories.
What is a measure of liquidity?
the two ratios that measure liquidity is acid test and current ratio. the acid test ratio is current assets- stock/ current liabilities the current ratio is current assets/ current liabilities
What is the quick ratio?
The quick (or acid-test) ratio equals current assets minus inventory divided by current liabilities. This ratio is used to evaluate liquidity and is often used in conjunction with the current ratio. The difference between the current ratio and the quick ratio tells you how much inventory may be tied up in current assets. Relatively large inventories are often a sign of short-term trouble.
Inventory of merchandise is a current asset?
Yes, as inventories could be considered as current assets. But wil calcuating quick ratio or acid test ratio, inventories to be deducted from other current assets.
An example of liquidity ratio is the?
current ratio and acid test ratio are examples of liquidity ratios'. current ratio is current asset's/ current liabilities. acid test ratio is current assets- stock / current liabilities.
Should an acid-test ratio increase or decrease?
ok
What is the financial ratio used to assess a company's liquidity?
The quick ratio which equals total assets/total liabilities Answer: Liquidity Ratios are the ratios that can be used to measure the liquidity of a company. As a rule of the thumb, all companies must have good liquidity ratios. The four main ratios that fall under this category are: 1. Current Ratio or Working Capital Ratio 2. Acid-test Ratio or Quick Ratio 3. Cash Ratio 4. Operation Cash-flow ratio
What is the ideal acid test ratio?
some where between 1 to 1.5
Disadvantages of high acid test ratio?
carl is a semi-kin
