# Acid Test Ratio Calculator

Acid Test Ratio Calculator is used to calculate the Acid Test Ratio of a firm's short-term assets

Acid Test Ratio:
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#### Background Information

What does Acid Test Ratio mean?
The acid-test ratio is an indicator of a firmâ€™s sufficient short-term assets to cover its immediate liabilities. This is more reliable than the current ratio since it ignores illiquid assets such as inventory.
Formula
Acid Test Ratio = (Current Assets - Inventories) / Current Liabilities
Example

Below is a company's balance sheet, for the fiscal year ended October 30, 2017, by it the acid-test ratio can be calculated.

 Cash equivalents \$20,289 Short-term marketable securities \$53,892 Accounts receivable \$17,874 Inventories \$4,855 Vendor non-trade receivables \$17,799 Other assets(current) \$13,936 Total assets(current) \$128,645 Accounts payable \$49,049 Accrued expenses \$25,744 Deferred revenue \$7,548 Commercial paper \$11,977 Current portion of long-term debt \$6,496 Total liabilities(current) \$100,814

According to the formula, we can divide current liquid current assets by total current liabilities:-

• The companyâ€™s acid-test ratio = (20,289 + 53,892 + 17,874 + 17,799) / 100,814
• = 1.09
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