Final answer:
The acid-test ratio, also known as the quick ratio, is a financial metric that measures a company's ability to cover its short-term obligations without selling inventory.
Step-by-step explanation:
The acid-test ratio is also known as the quick ratio. The acid-test, or quick, ratio is a financial metric used to evaluate a company's ability to pay its short-term obligations without having to sell its inventory. It is calculated by taking the sum of the company's cash, cash equivalents, short-term investments, and current receivables, divided by the current liabilities. It is a more conservative measure compared to the current ratio, as it excludes inventory, which is not always readily convertible to cash.
To determine the acid-test ratio, the following formula is used:
Acid-Test Ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities