Acid-Test Ratio

Also known as Quick ratio. Acid-Test Ratio is the ratio of current assets minus inventories (or stock) to current or short term liabilities. Acid test ratio measure a company's ability to pay off or retire its current liabilities or short term liabilities (e.g. notes payable, account payable) using liquid assets or current assets (e.g. cash, account receivable)



It is calculated like current ratio, except inventory is subtracted.


                                                                  Current Assets – Inventory
          Quick Ratio or Acid-Test Ratio= ------------------------------------------------
                                                                     Current Liabilities