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Acid test |
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Acid testA financial ratio which is similar to the current ratio, but more stringent. It is defined as:current assets minus stocks divided by current liabilitiesand it shows whether a company would be able to pay its debts if it needed to satisfy creditors but it had no time to sell any of its assets.If the acid test is 1 or higher, a company passes the test.Similar MatchesAcid test ratioAcid test ratioAlso called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities. Acid ratioAcid ratioSee 'acid test'. |
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