Glossary

Acid test ratio – Quick ratio

The Acid Test Ratio (or Quick Ratio) is a common measure for the capacity of a business to meet short term commitments.

[current assets – (stock + work in progress)] / [current liabilities][Cash + Accounts receivables + Short term investments] / [current liabilities]Hence, a quick ratio of 1,00 means that 1 EUR of assets is available to cover 1 EUR of liabilities. A quick ratio of 0,50 for instance is not as good.

Updated 1/3/2016

Definitions provided under this section refer to the Belgian situation; unless specified otherwise. The texts are meant to summarize concepts in daily language and should not be considered as comprehensive or definite. We welcome suggestions for modifications or additions at glossary@tcm.be.