ACID TEST RATIO: A MEASURE OF FINANCIAL HEALTH

Acid Test Ratio is a measure of a company's financial health.

It is also known as the Quick Ratio or the Liquid Ratio.

It is used to determine whether a company has enough short-term assets to cover its short-term liabilities.

The formula for Acid Test Ratio is: (Current Assets - Inventory) / Current Liabilities.

A ratio of 1:1 is considered to be a good Acid Test Ratio.

Acid Test Ratio is a more conservative measure of liquidity than the Current Ratio.

Acid Test Ratio is an important tool for investors and creditors to evaluate a company's financial health.