The Acid-Test Ratio, also known as the quick ratio, is a financial metric used in acid test accounting to assess a company’s short-term liquidity. It measures the ability to cover current liabilities with quick assets, excluding inventory. Calculated as (Current Assets – Inventory) / Current Liabilities, a ratio above 1 indicates strong liquidity. This ratio is crucial for evaluating a firm’s financial health without relying on inventory sales.
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