An Acid Test Ratio is a tool that gives an overview of a company’s ability to pay off any outstanding liabilities. The Acid Test Ratio will compare the company’s short-term assets to its liabilities to verify if it has the available cash to pay off any debt, immediately. This timeframe is usually taken within a 90 day period and any assets that are not capable of being liquidated instantly are excluded from the test.
Acid Test Ratio
Defenition: An Acid Test Ratio is a tool that gives an overview of a company’s ability to pay off any outstanding liabilities.
