ACID-TEST RATIOAJEY KARTHIK J P1502011CONCEPTA severe test of a businesss soven!" #its !a$abiit" to $a" t%e iabiities t%at &i !o'e (ue in t%e s%ort ter') t%an t%ecurrent ratioE+!u(es inventor" an( $re$ai( e+$enses, &%i!% t%e !urrent ratio in!u(es, an( it i'its assets to !as% an( ite's t%at t%e business !an -ui!." !onvert to !as%Cas%, !as% e-uivaents, s%ort/ter' invest'ents or 'ar.etabe se!urities, an( !urrent a!!ounts re!eivabe are !onsi(ere( -ui!. assets0ui!. assets are !urrent assets t%at !an be !onverte( to !as% &it%in 10 (a"s or in t%e s%ort/ter'0ui!. ratio or Poun!e ratio / &%ere a $a!. of &oves #.no&n ascreditors) !ou( $oun!e on t%e business an( (e'an( -ui!. $a"'ent of t%e businesss iabiitiesHi2%er t%e ratio, 'ore 3nan!ia" se!ure a !o'$an" in s%ortter'4 E25 6ast foo( 2iants/E+$an( at a ver" fast $a!e, invest'ent nee(sAternative", a !o'$an" 'a" %ave a o&er -ui!. ratio (ue to better !re(it ter's &it% su$$iers t%an t%e !o'$etitors E25 Retai in(ustr"/ 7tabe business environ'ent, favorabe !re(it ter's &it% su$$iers48ra&ba!.s5no infor'ation about t%e eve an( ti'in2 of !as% 9o&sAssu'es a!!ounts re!eivabeare rea(i" avaiabe for !oe!tion, &%i!% 'a" not be t%e !ase for 'an" !o'$aniesfor'ua assu'es t%at a !o'$an" &ou(i-ui(ateits!urrent assetsto $a" !urrent iabiities, &%i!% is not a&a"s reaisti!, !onsi(erin2 so'e eve of&or.in2 !a$itais nee(e( to 'aintain o$erations4RETAI: ;A:ANCE 7HEET041INEERIN> ;A:ANCE 7HEET041?@TE:ECOA ;A:ANCE 7HEET0420THANK YOU