What is Acid Test Ratio and Roa

Acid Test Ratio and Roa

What is acid test ratio and ROA? Acid test ratio or quick asset ratio is an excellent way to test the capability of the company to meet its current debts. The computation of acid test ratio or quick asset ratio is quick assets divided by the firm’s current liabilities. Quick assets pertain to cash, receivables of the company and its temporary investments in the form of marketable securities. The term “quick” refers to the ability of the company to realize or dispose these assets during one accounting period or one year.  

ROA or return on assets is a financial ratio that measures the earning power of the company based on its available assets. Hence, to compute the ROA of a certain company based on its financial reports is to get the net income and divide it by the total assets. 

Roa Stands For 

 ROA,     Return On Assets.

ROA,       Report(s) Of Audit. 
ROA,       Reserve Officers Association.  
ROA,       Resource-Oriented

What is acid test ratio and ROA? Acid test ratio and ROA are the ways to analyze and interpret the data reflected in the financial statements. These ratios are used by management and non-management groups. The accounting reports being used by management are detailed, comprehensive and exact containing past and present financial data which even reflected the budgeted figures. On the part of non-management group, their analysis is dependent on the published financial reports since they do not have access in the accounting records.

The officers of the business are supposed to discharge their responsibilities properly in order to manage the operations well enough. This concerns what is acid test ratio and ROA all about. The operational ability to generate income based on existing assets.


What is acid test ratio and ROA to the investors is a guide whether the amount invested is worth the sum of the net income the business is generating. On the same principle, what is acid test ratio and ROA to top management is the appropriate discharge of their financial and operating responsibilities.

What is acid test ratio and ROA are financial ratios measuring the performance of the company as a whole to accumulate income based on available resources. What is acid test ratio and ROA to some may be immaterial as long as they are receiving a fixed return on the amount invested on a periodic basis. However, computing what is acid test ratio and ROA of a certain established enterprise will equip the users when to put additional investment or in an unlikely manner, pull out their investment.  

Formula of Quick Ratio