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 Glossary   >   A   >   "Acid test" Definition   

        Acid test

A financial ratio which is similar to the current ratio, but more stringent. It is defined as:current assets minus stocks divided by current liabilitiesand it shows whether a company would be able to pay its debts if it needed to satisfy creditors but it had no time to sell any of its assets.If the acid test is 1 or higher, a company passes the test.

Acid test


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Acid test - A financial ratio which is similar to the current ratio, but more stringent. It is defined as:current assets minus stocks divided by current liabilitiesand it shows whether a company would be able to pay its debts if it needed to satisfy creditors but it had no time to sell any of its assets.If the acid test is 1 or higher, a company passes the test.


Acid test : a financial ratio which is similar to the current ratio, but more stringent. it is defined as:current assets minus stocks divided by current liabilitiesand it shows whether a company would be able to pay its debts if it needed to satisfy creditors but it had no time to sell any of its assets.if the acid test is 1 or higher, a company passes the test.