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In finance, the quick ratio, also known as the acid-test ratio is a type of liquidity ratio, which measures the ability of a company to use its near-cash or 'quick' assets to extinguish or retire its current liabilities immediately. It is defined as the ratio between quickly available or liquid assets and current liabilities.
The formula is: Current ratio: Current assets / Current liabilities ... A more conservative measure of liquidity is the quick ratio — also known as the acid-test ratio — which compares cash ...
A financial ratio or accounting ratio states the relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers ...
The quick ratio, or acid-test, measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets are those that can be quickly turned into cash if necessary. It would not be used for substantial period of time such as, normally, twelve months.
A quick ratio tests a company’s current liquidity and solvency. It is a measure of whether the company can pay its short-term obligations with its cash or cash-like assets on hand. (Short term ...
Development. Misconduct. v. t. e. In accounting, liquidity (or accounting liquidity) is a measure of the ability of a debtor to pay their debts as and when they fall due. It is usually expressed as a ratio or a percentage of current liabilities. Liquidity is the ability to pay short-term obligations.
Quick ratio (also known as an acid test) or current ratio, accounting ratios used to determine the liquidity of a business entity; In accounting, the liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash. It is the result of dividing the total cash by short-term borrowings.
Financial analysts also employ the "acid test" nickname for the quick ratio method, which assesses the liquidity of a business. The term "acid test" took on a different meaning in the realm of experiences with the psychedelic drug LSD, popularized by the Merry Pranksters. This association stems from the drug's colloquial name, "acid" (which ...