What is another term for the "acid-test ratio"?

The term "acid-test ratio" is often synonymous with the "quick ratio." This financial metric serves as a measure of a company's short-term liquidity, indicating its ability to meet its short-term obligations without relying on the sale of inventory. It is calculated by dividing quick assets (current assets minus inventory) by current liabilities.

The importance of this ratio lies in its focus on the most liquid assets, providing a more stringent assessment of a company's liquidity than the current ratio, which includes inventory in its calculation. The quick ratio is particularly useful for investors and creditors as it illustrates the company’s capacity to pay off its current liabilities swiftly, ensuring the business can withstand short-term financial challenges. This is why the quick ratio is the correct term associated with the acid-test ratio.

In contrast, other options such as the current ratio reflect a broader scope of current assets and include inventory, while the profit margin ratio focuses on profitability, and the price-earning ratio evaluates stock price relative to earnings. These distinctions make it clear why "quick ratio" is the term that directly corresponds to the acid-test ratio.