what does the acid test ratio tell you 
the acid test or quick ratio shows if a company has or can get enough cash to pay its immediate liabilities such as short term debt for most industries the acid test ratio should exceed 1 0 if it s less than 1 0 then companies do not have enough liquid assets to pay their current liabilities and should be treated with caution if the acid test ratio is much lower than the current ratio it means that a company s current assets are highly dependent on inventory on the other hand a very high ratio could indicate that accumulated cash is sitting idle rather than being reinvested returned to shareholders or otherwise put to productive use 