What is Acid Test Ratio, Current Ratio and Merchandise Turnover ?

1.What is Merchandise Turnover?

Merchandise or Inventory turnover measures how efficiently a company uses its inventory by dividing the cost of goods sold by the average inventory value during the period. 

Formula:-

               Cost of goods sold

          --------------------------------

                  Average stock

2. What is Current Ratio ?

The current ratio compares all of a company’s current assets to its current liabilities. 

Formula:-

                    Current Assets

          ----------------------------------

                  Current Liabilities

3. What is Acid Test Ratio ?

The acid-test, or quick ratio, compares a company's most short-term assets to its most short-term liabilities to see if it has enough cash to pay its immediate liabilities, such as short-term debt.

Formula:-

                     Liquid Assets

             --------------------------------

                  Current Liabilities