The Acid-Test Ratio measures how well a business can deal with an abrupt reduction in sales. Although it might sound extreme, it happened to many stores due to COVID-19 in 2020. This test might even show how long a business can last, considering the scenario. The primary purpose of this test is to establish how fast a company can be liquidated and help retailers find ways to deal with financial crises and debts.
Take a look at the video below by the Investors Trading Academy about this ratio:
Source: "Acid-Test Ratio" on corporatefinanceinstitute.com