Define: Acid Test Ratio

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Definition: Acid Test Ratio

Quick Summary of Acid Test Ratio

The ratio of liquid assets to current liabilities.

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What is the dictionary definition of Acid Test Ratio?

Dictionary Definition

Full Definition of Acid Test Ratio

Examples of Acid Test Ratio in a sentence

The larger the acid-test ratio, the better able the business is to pay its current liabilities.
In general, an acid-test ratio of 1.00 is considered safe.
The acid-test ratio assumes that all current liabilities are payable immediately and that the debtor will convert the most liquid assets to cash.

Acid Test Ratio FAQ's

What is a good acid test ratio number?
What is the ideal acid test ratio?
Is inventory included in an acid test ratio?
Why is the acid test ratio useful?

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To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

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https://payrollheaven.com/define/acid-test-ratio/
Modern Language Association (MLA):
Acid Test Ratio. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. August 24, 2019 https://payrollheaven.com/define/acid-test-ratio/.
Chicago Manual of Style (CMS):
Acid Test Ratio. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/acid-test-ratio/ (accessed: August 24, 2019).
American Psychological Association (APA):
Acid Test Ratio. PayrollHeaven.com. Retrieved August 24, 2019, from PayrollHeaven.com website: https://payrollheaven.com/define/acid-test-ratio/

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This glossary post was last updated: 23rd December 2018.