What is quick ratio?

Modified on Mon, 18 Jun, 2018 at 12:31 PM

The quick ratio is an indicator of a company’s short-term liquidity, and measures a company’s ability to meet its short-term obligations with its most liquid assets. Because we're only concerned with the most liquid assets, the ratio excludes inventories from current assets. Quick ratio is calculated as follows:

Quick ratio = (current assets – inventories) / current liabilities, or

Quick ratio = (cash and equivalents + marketable securities + accounts receivable) / current liabilities

The quick ratio is also known as the acid-test ratio.


Source : Investopedia


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