Quick Ratio

The Quick Ratio (or Acid-Test Ratio) is a financial ratio that provides information about a company’s liquidity. These ratios are sometimes referred to as liquidity measures. Liquidity measures a company’s ability to pay its bills over the short run without undue stress. The quick ratio equation is similar to the current ratio, except that inventory is omitted. This is because inventory is often the least liquid current asset. The quick ratio equation is: (Current assets – inventory) divided by current liablities.

${\mbox{Quick (Acid Test) Ratio}}={{\mbox{Cash and Cash Equivalent}}+{\mbox{Marketable Securities}}+{\mbox{Accounts Receivable}} \over {\mbox{Current Liabilities}}}$

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