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In finance, the quick ratio, also known as the acid-test ratio, is a liquidity ratio that measures the ability of a company to use near-cash assets (or 'quick' assets) to extinguish or retire current liabilities immediately. It is the ratio between quick assets and current liabilities. A normal liquid ratio is considered to be 1:1.
Quick ratio (also known as an acid test) or current ratio, accounting ratios used to determine the liquidity of a business entity; In accounting, the liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash. It is the result of dividing the total cash by short-term borrowings.
For a corporation with a published balance sheet there are various ratios used to calculate a measure of liquidity. [1] These include the following: [2] The current ratio is the simplest measure and calculated by dividing the total current assets by the total current liabilities.
Acid-test ratio (Quick ratio) [18] Current Assets − (Inventories + Prepayments) / Current Liabilities Cash ratio [18] Cash and Marketable Securities / Current Liabilities Operating cash flow ratio Operating Cash Flow / Total Debts Net working capital to sales ratio [19] Current Assets - Current Liabilities / Sales
The quick ratio, or acid-test ratio, measures the ability of a company to use its near-cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets are those that can be quickly turned into cash if necessary and may not be used for a substantial period of time such as twelve months.
Financial analysts also employ the "acid test" nickname for the quick ratio method, which assesses the liquidity of a business. The term "acid test" took on a different meaning in the realm of experiences with the psychedelic drug LSD, [9] popularized by the Merry Pranksters. This association stems from the drug's colloquial name, "acid" (which ...
The current ratio is an indication of a firm's accounting liquidity. Acceptable current ratios vary across industries. [1] Generally, high current ratio are regarded as better than low current ratios, as an indication of whether a company can pay a creditor back. However, if a company's current ratio is too high, it may indicate that the ...
Calcium oxide (formula: Ca O), commonly known as quicklime or burnt lime, is a widely used chemical compound. It is a white, caustic , alkaline , crystalline solid at room temperature . The broadly used term lime connotes calcium-containing inorganic compounds , in which carbonates , oxides , and hydroxides of calcium, silicon , magnesium ...