Acid test ratio=
Current assets- stock
Current liabilities
=0
=0:1 ratio means= to every £1 of liabilities, the company has (0) of assets
= The ideal result is 0.75:1 to 1:1
The acid test is the only one to be used in the exam. Acid test is more accurate as stock cant always be seen as current, so acid test = a fairer comparison between different companies due to nature of stock
Comments
No comments have yet been made