Acid ratio

Acid ratio is the comparison between a company's short-term assets and the immediate liabilities. It is a test that indicates whether a firm has enough short-term assets to cover its liabilities. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets. It is caluclated by the following equation:

(cash+accounts receivable+short term investments)/(current liabilities)

Source

This entry includes content from the following Wikipedia article: Acid Test Ratio