Replies to post #236209 on Elite Pharmaceuticals Inc (ELTP)

[Goodtimes93]

Well it was better then the current ratio. I ran most of the stress testing for Basel and know how easy it is to implode such a simplistic measure. Quick or acid test in name is meaningless. As your degree may have taught you they eliminate assets which have no true liquidity.

[namtae]

A refresher course

Your acid test ratio is really better known in finance as a quick ratio. You know...Current assets minus inventory divided by liabilities.

The above DOES NOT define the Acid Ratio!!

Current assets minus inventory, minus many other variables such as prepayments etc..basically minus everything that is not considered liquid...

The greater miscalculation above is the denominator. The denominator IS NOT LIABILITIES!! It is CURRENT LIABILITIES!! A huge distinction between the two

Oh, by the way, the ACID RATIO is much more indicative of a companys liquidity than Current Ratio because it eliminates all illiquid current assets for a truer picture

Glad I could help you understand