Acid Test 1100 Words You Need Week 41 Day 2

Acid Test 1100 Words You Need Week 41 Day 2

Acid Test 1100 Words You Need Week 41 Day 2

the conclusive test of value or success, decisive test, litmus test, touchstone, indicator, trial, criterion, confirmation

The acid test (or quick ratio) recognises that inventory often takes a long time to convert into cash. It therefore excludes inventory values from liquid assets. Traditionally textbooks tell us that this ratio should exceed 1:1 but once again many successful companies operate below this level.

In practice a company’s current ratio and acid test should be considered alongside the company’s operating cash flow. A healthy cashflow will often compensate for weak liquidity ratios.

Source: https://www.accaglobal.com/

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Dr. Mohammad Hossein Hariri Asl

Dr. Mohammad Hossein Hariri Asl is an English and Persian instructor, educator, researcher, inventor, published author, blogger, SEO expert, website developer, entrepreneur, and the creator of LELB Society. He's got a PhD in TEFL (Teaching English as a Foreign Language).

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