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Investments glossary

Acid-Test Ratio


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\'\'It is therefore doubtful if President Mohammadu Buhari will be able to deliver his campaign promises to Nigerians if the price of crude oil which accounts for some 90% of Nigeria’s total export revenue and 75% of total consolidated revenue continue to hover around $50 per barrel between now and 2019.\'\' Chika Onuegbu in his 2015 paper titled “HISTORICAL OVERVIEW OF THE IMPACT OF GLOBAL OIL POLITICS ON CRUDE OIL PRICES, INVESTMENTS AND EMPLOYMENT RELATIONS IN THE NIGERIAN OIL AND GAS INDUSTRY”

— Chika Onuegbu

The acid-test ratio uses a firm’s balance sheet data as an indicator of whether it has sufficient short-term assets to cover its short-term liabilities. This metric is more useful in certain situations than the current ratio, also known as the working capital ratio, since it ignores assets such as inventory, which may be difficult to quickly liquidate.

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