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| {{Other uses|Acid test (disambiguation)}}
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| In [[finance]], the '''Acid-test''' or '''quick ratio''' or '''liquid ratio''' measures the ability of a company to use its ''near cash'' or quick assets to extinguish or retire its [[current liability|current liabilities]] immediately. Quick assets include those [[current asset]]s that presumably can be quickly converted to cash at close to their [[book value]]s. A company with a Quick Ratio of less than 1 cannot currently fully pay back its current liabilities.
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| <math>\mbox{Quick (Acid Test) Ratio} = {\mbox{Cash and Cash Equivalent} + \mbox{Marketable Securities} + \mbox{Accounts Receivable}\over \mbox{Current Liabilities}}</math>
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| Note that [[Inventory]] is excluded from the sum of assets in the Quick Ratio, but included in the [[Current Ratio]].
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| Ratios are tests of viability for business entities but do not give a complete picture of the business' health. If a business has large amounts in Accounts Receivable which are due for payment after a long period (say 120 days), and essential business expenses and Accounts Payable due for immediate payment, the Quick Ratio may look healthy when the business is actually about to run out of cash. In contrast, if the business has negotiated fast payment or cash from customers, and long terms from suppliers, it may have a very low Quick Ratio and yet be very healthy.
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| Generally, the acid test ratio should be 1:1 or higher, however this varies widely by industry.<ref>{{cite book
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| |last=Tracy
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| |first=John A.
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| |title=How to Read a Financial Report: Wringing Vital Signs Out of the Numbers
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| |year=2004
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| |publisher=John Wiley and Sons
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| |isbn=0-471-64693-8
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| |page=173 }}</ref> In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).<ref>{{cite book | last = Gallagher | first = Timothy | title = Financial Management | publisher = Prentice Hall | location = Englewood Cliffs | year = 2003 | isbn = 0-13-067488-5 | pages = 94–95}}</ref>
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| Notice that very often "Acid test" refers to Cash ratio, instead of Quick ratio:
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| <math>\mbox{Acid Test Ratio} = {\mbox{(Current Assets} - \mbox{Inventory})\over \mbox{Current Liabilities}}</math><ref>http://www.investopedia.com/terms/c/cash-ratio.asp
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| </ref>
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| ==See also==
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| *[[Current ratio]]
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| *[[Financial Accounting]]
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| == References ==
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| <references/>
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| [[Category:Financial ratios]]
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Alyson is the title people use to call me and I think it seems quite good when you say it. One of the things she loves most is canoeing and she's been performing it for fairly a whilst. Kentucky is exactly where I've always been living. Credit authorising is where my main earnings arrives from.
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