Liquidity ratios: current and acid test

Enter current assets, inventory and current liabilities to see the liquidity ratios.

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Questions students ask

Why leave inventory out of the acid test?

Stock may take time to sell, or sell for less, so it cannot be relied on to pay bills that are due soon.

What formula does it use?

Current ratio = current assets ÷ current liabilities; acid test = (current assets − inventory) ÷ current liabilities.

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