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cRYPTO Glossary
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Acid Test Ratio
An acid test ratio is a financial metric used to assess a company's ability to pay off its current liabilities.
Explanation of Specific Terms:
- Financial metric: A quantitative measure used to evaluate financial performance.
- Current liabilities: Debts or obligations that must be settled within one year.
- Ability to pay off: The company's capability to meet its short-term financial obligations.
- Acid test ratio: Also known as the quick ratio, it excludes inventory from current assets to provide a more stringent measure of liquidity.
Key Points for Beginners:
- Why it's important: The acid test ratio helps stakeholders evaluate how well a company can cover its immediate financial obligations without relying on the sale of inventory.
- How it works: Calculated by dividing a company's quick assets (cash, marketable securities, accounts receivable) by its current liabilities. A ratio of 1 or higher indicates that the company can meet its short-term liabilities using its most liquid assets.
Valdis Zhvaginsh
Crypto Enthusiast, CWT Editor
Hello, I'm Valdis
When I began exploring cryptocurrencies, I had many questions. Over time, I've gathered some of the best resources that helped me, and I believe they can be useful to you as well.
I hope these resources assist you in starting your journey into the world of cryptocurrencies and provide useful tools for everyday tasks.
If you have any suggestions or corrections, please contact me
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