Just like Current Ratio, the Acid Test Radio is one of the liquidity ratios (more conservative) used to estimate a company's cash flow for the next 12 months, where the inventory has been excluded from the current assets. In other words, is the company able to survive without getting into more debts if we assume that there's no inventory. As a general rule of thumb, ratios above or equal to 1 is desirable for conservative investors.
The formula for determining the Acid Test Ratio is defined as:
\(ATR\): Acid test ratio
\(Current\text{ }Assets\): Cash or other assets which are expected to be converted into cash within the current fiscal year.
\(Inventory\): Raw materials, components, finished goods, supplies and so on.
\(Current\text{ }Liabilities\): Debts that a company must pay within the fiscal year. All numbers in thousands..
ATR
Use this calculator to determine a company's Acid Test Ratio
Cash or other assets which are expected to be converted into cash within the current fiscal year.
enter a number in thousands, enter 5 for 5,000 or 50 for 50,000
Raw materials, components, finished goods, supplies and so on.
enter a number in thousands, enter 5 for 5,000 or 50 for 50,000
Debts that a company must pay within the fiscal year. All numbers in thousands..
enter a number in thousands, enter 5 for 5,000 or 50 for 50,000
Please note, that all calculators provided are for informational and educational purposes ONLY, and should NOT be taken as professional financial advice.
