ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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PURCHASING POWER Definition
PURCHASING POWER is the value of a particular monetary unit in terms of the amount of goods or services that can be purchased with it, i,e, the ability to purchase, generally measured by income.
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QUICK RATIO (or Acid Test Ratio) is a more rigorous test than the Current Ratio of short-run solvency, the current ability of a firm to pay its current debts as they come due. This ratio considers only cash, marketable securities (cash equivalents) and accounts receivable because they are considered to be the most liquid forms of current assets. A Quick Ratio less than 1.0 implies "dependency" on inventory and other current assets to liquidate short-term debt. Formula: (Cash + Cash Equivalents + Accounts Receivable) / Total Liabilities
SECURITY STOCK see SAFETY STOCK.