acid test ratio

Popular Terms
Key measure of a firm's liquidity, it answers the question "Can this firm meet its current obligations from its liquid assets if suddenly all sales stop?" More stringent than 'current ratio,' it excludes inventories (typically the least liquid of current assets) to concentrate on the more liquid assets of the firm. Usually an acid test ratio of 1.0 or higher is considered satisfactory by lenders and investors. Also called acid ratio or quick ratio. Formula: (Current assets - inventory value) รท current liabilities. See also current ratio.

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The acid test ratio we were performing was going really well and I was looking forward to the next part of the process.
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You need to perform an acid test ratio on any new chemicals to make sure that they won't cause a bad reaction with the old.
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During the meeting, the manager mentioned the importance of conducting a regular acid test ratio to ensure that the company would always stay afloat as a business.
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