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Acid Test Ratio

Definition of Acid Test Ratio

An Acid Test Ratio shows whether a company has enough liquid short-term assets to deal with current liabilities.

The higher the Acid Test Ratio the better a company’s ability to deal with debt.

Acid Test Ratio = (Cash + Marketable Securities + Accounts Receivable)/Current liabilities

Related Terms

Anchoring and Adjustment

Anchoring is a bias that drives people to make decisions that are based on (anchored to) pre-existing notions, ideas, and suggestions that may or may not be true.

Adjustments around anchoring are common as it becomes a starting point for many when it comes to decision-making.

For example, someone is anchored to a financial model or strategy. They may choose to use the anchor in situations where it may not fit and as a result, may end up getting an unfavorable outcome.

Equity Delivery

In equity delivery, shares are delivered to an investor’s Demat account after the settlement period. That’s why it is called equity delivery. However, equity delivery is also known as delivery trading and long term investing.

For example, let’s say you place an order for 10 HDFC shares on Tuesday with a view of holding onto them for the long term. The trade will be settled on Thursday shortly after which the shares will be delivered to your Demat account.

At The Opening

At the opening is an instruction to execute an order at the open price, which is the price of a security at the start of regular stock market hours.

Buy and Hold

Buy and hold is a long term investment strategy that is designed to help investors ride out market volatility by buying and holding fundamentally solid businesses that have the potential to grow over decades.

Adjusted Futures Price

An adjusted futures price shows the cost of purchasing, financing, and delivering the underlying assets of a futures contract.

The adjusted futures price is calculated by multiplying the price of the underlying asset by the number of units to be delivered (known as the conversion factor).

Futexagri

Futexagri refers to the commodity index of futures on NCDEX that’s equal-weighted, meaning all components have equally proportional weights assigned to them, comprised of the futures contracts of the most recent month.



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