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The Acid Test

In business finance the acid test is a quick formula that indicates whether a business is able to easily pay its creditors …  The acid test was coined from an accepted process of finding out whether gold is genuine or not.  [Gold is one of the few precious metals not affected by the majority of acids.  It can be tested and hence its financial standing over the test of time.]

 

Feel free to request the templates laura@thehiddenedge.co.uk. I am happy to share.

1. Compute your acid test ratio … what does it tell you?

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2. If you are unable to repay your debts you may need to consider a way out.

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3. Consult an insolvency practitioner before things go too far.  They can help you with immediate cash flow solutions that don’t involve going down the insolvency route.  And if you are too far down the line they can take the debtor pressure off so you can trade through … if you talk to them early enough.

Please do share your experiences with these models in the comments below.  I am building a portfolio of small business case studies and would love to include examples of what has worked well for you.

PS – If you need further help then give me a call on 07962 626604 to arrange a Skype session with me.

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