Acid Test Ratio Calculator
Acid Test Ratio Calculator is used to calculate the Acid Test Ratio of a firm's short-term assets.
All processing happens on the client-side, locally in your browser. No data is uploaded.
History
- 2018-10-24Calculation formula breakdown and table
- 2018-05-22Tool Launched
Background
- What does Acid Test Ratio mean?
- The acid-test ratio is an indicator of a firm’s sufficient short-term assets to cover its immediate liabilities. This is more reliable than the current ratio since it ignores illiquid assets such as inventory.
- Formula
-
Acid Test Ratio =
Where:-
- c = cash
- a = accounts receivable
- i = short term investments
- l = current liabilities
- Example
-
Below is a company's balance sheet, for the fiscal year ended October 30, 2017, by it the acid-test ratio can be calculated.
Cash equivalents $20,289 Accounts receivable $17,874 Vendor non-trade receivables $17,799 Short-term marketable securities $53,892 Inventories $4,855 Other assets(current) $13,936 Total assets(current) $128,645 Accounts payable $49,049 Accrued expenses $25,744 Deferred revenue $7,548 Commercial paper $11,977 Current portion of long-term debt $6,496 Total liabilities(current) $100,814 According to the formula, we can divide current liquid current assets by total current liabilities:-
- Acid Test Ratio =