Acid test ratio
Definition of Acid test ratio
The acid ratio also known as the quick ratio shows the company's ability to deal with its short-term liability. It depicts how short-term solvency of the company and whether its current assets are enough or not to meet its current liabilities.
The formula for calculating the Acid ratio for any company= current assets/ current liability.
The higher the ratio better the company. It is an important ratio to consider while assessing the fundamentals of the company.
