What is the ideal range of the Acid Test Ratio?

The ideal range for the Acid Test Ratio is 1:1 to 2:1, which indicates that the company has sufficient current assets to meet its current liabilities.

Acid Test Ratio = 1 - This indicates that the company can exactly meet its short-term liabilities using current assets.

Acid Test Ratio > 1 - This indicates that the company can easily pay off its current liabilities and has strong liquidity.

Acid Test Ratio < 1 - This ratio indicates that the company may be at risk and could struggle to pay its short term debts using current assets.

Acid Test Ratio > 2 - This indicates that the company can easily meet its current liabilities and may have excess current assets, which could suggest inefficient use of liquid resources.