Acid-Test Ratio Analysis
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Business & Economics
How Acid-Test Ratios Are Used in Business and Investing

89% Informative
The acid-test ratio is a financial metric that assesses a company’s ability to cover short-term liabilities with its most liquid assets.
A higher ratio suggests a firm has strong liquidity, reducing the risk of financial distress.
A lower ratio may indicate potential cash flow challenges.
Acid-Test Ratio originates from the historical practice of using acid to test the purity of gold.
The acid-test ratio provides a strict test of a company's liquidity.
It measures whether a business can meet its short-term obligations using only its most liquid assets.
VR Score
93
Informative language
94
Neutral language
70
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informal
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English
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64
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long-living
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10
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1
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