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Acid Test
The expression Acid Test, also known as
quick ratio, is an indicator of liquidity of a very short term that
seeks to evaluate the company’s capacity to cope with its short term
financial compromises using only their net financial resources, this is,
without the need of existences sales or debt receipts from clients and
other debtors.
It’s calculated by the ratio between the
financial availabilities (or liquid financial assets) held by the
company (cash, bank deposits and short term financial applications) and
the short term liabilities. If its value is superior to 1, means that
the company has capacity to honor its short term financial compromises
using only their net financial availabilities.
A = Financial Availabilities / Short
Term Liabilities
Translated from Portuguese
by Susana Saraiva, Portuguese-English and English-Portuguese translation
specialist. Contact: spams@sapo.pt.
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