Financial ratio's - Liquidity

3 important questions on Financial ratio's - Liquidity

There are two ratios that are concerned with he ability of the business to meet its short-term obligations, what are the two ratios?

  • Current ratio
  • Acid test ratio

What does the acid test represent?

A more stringent test of liquidity.

What is the formula for the acid test ratio

Acid test ratio = current assets ( excluding inventories) / current liabilities.

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