{"id":67,"date":"2009-02-03T00:51:52","date_gmt":"2009-02-03T05:51:52","guid":{"rendered":"http:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/?p=67"},"modified":"2009-02-03T00:51:52","modified_gmt":"2009-02-03T05:51:52","slug":"the-acid-test-can-you-make-it","status":"publish","type":"post","link":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/archives\/the-acid-test-can-you-make-it","title":{"rendered":"The Acid Test &#8211; Can You Make It?"},"content":{"rendered":"<p><span style=\"font-size: x-small; font-family: Arial;\">The <strong>Acid Test<\/strong> is a ratio used in business to measure how liquid your business is. It allows you to keep track of the financial pulse of the practice.<\/span><\/p>\n<p>A <strong>ratio<\/strong> is just a comparison of several pieces of information that, when compared, tell you more than the single piece of information would.<\/p>\n<p>The Acid Test allows you to quickly assess whether or not cash flow will be a problem if, for example, your revenues should slow or suddenly drop significantly.<\/p>\n<p>Here&#8217;s the formula:<\/p>\n<p><span style=\"color: #000080;\"><span style=\"text-decoration: underline;\"><strong>Cash\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/strong><\/span><\/span> \u00a0\u00a0\u00a0\u00a0\u00a0(cash in the till, money in checking and savings, money market)<br \/>\n<span style=\"color: #000080;\"><strong>Current Liabilities<\/strong><\/span> \u00a0\u00a0\u00a0\u00a0\u00a0(accounts payable, taxes due, current amount due on loans)<\/p>\n<p>Since we are looking at a specific point in time with this test, your liabilities are for that specific period. Let&#8217;s use one month as the example. So to get your current liabilities, add up all the bills that are due for the month along with any payments that are due on notes or loans or any tax payments that are due. This figure is your current liabilities.<\/p>\n<p>Divide your cash by your current liabilities. <span style=\"color: #000080;\"><span style=\"text-decoration: underline;\">The number you get is the ratio<\/span><\/span>.<\/p>\n<p><strong>With the Acid Test, the ratio should be close to 1<\/strong>.<\/p>\n<p>Numbers under &#8220;1&#8221; mean that you may run short of cash. Numbers very much over &#8220;1&#8221; mean that there is extra cash.<\/p>\n<p>Depending on how much extra cash there is, and what your upcoming cash needs are (those that will occur just past the time period you measured, like the following month), it could be that you should be seeking ways to invest or maximize this cash, doing something more productive than just having it &#8220;sit&#8221;.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If all of a sudden your revenues dropped, can your practice still meet its financial obligations? Also known as the &#8220;quick ratio&#8221;, this simple calculation tells you how liquid your practice is. Easy to calculate and understand&#8230;(click the article title to read the full article)&#8230; <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[44],"class_list":["post-67","post","type-post","status-publish","format-standard","hentry","category-profits","tag-profits"],"_links":{"self":[{"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/posts\/67","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/comments?post=67"}],"version-history":[{"count":0,"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/posts\/67\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/media?parent=67"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/categories?post=67"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.privatepracticemarketingroundtable.com\/ppmr-members\/wp-json\/wp\/v2\/tags?post=67"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}