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## Acid Test Ratio,Quick Ratio

Here A=Current assets ,I=Inventory,L=current Liablities

## $A-\frac{I}{L}$

The Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities.

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