acid test definition

glossary: acid test definition

Glossary: acid test

Acid Test is a ratio of the ready-cash items like cash, accounts receivable, and marketable securities, to the current liabilities of a company. Acid Test ratio is a test of a company's ability to meet its immediate cash requirements. A higher ratio of ready cash items over current debts usually indicates a healthier company, one more likely to meet its current obligations.

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Definition: acid test

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