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
