What Is an Acid Test?

 An acid check is a business’s quick-term belongings minus accounts receivable and inventory, divided by way of quick-time period liabilities.

• The acid-test, or quick ratio, compares a company's most short-term assets to its most short-term liabilities to see if a company has enough cash to pay its immediate liabilities, such as short-term debt.
• The acid-test ratio disregards current assets that are difficult to liquidate quickly such as inventory.
• The acid-test ratio may not give a reliable picture of a firm's financial condition if the company has accounts receivable that take longer than usual to collect or current liabilities that are due but have no immediate payment needed.

This is a check of a corporation’s capacity to meet its instantaneous cash necessities. It is one of the more common commercial enterprise ratios utilized by economic analysts.

Eternal Source: 

1. Investopedia