Quick Ratio
📈 Investing
Quick Definition
The Quick Ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets without relying on inventory.
Formula
(Cash + Marketable Securities + Accounts Receivable) / Current LiabilitiesExamples
- 1A company with $100,000 in cash, $50,000 in marketable securities, $30,000 in accounts receivable, and $60,000 in current liabilities has a Quick Ratio of 3.0.
- 2A retail business with minimal cash and high inventory might have a low Quick Ratio, indicating potential liquidity problems.
- 3During a financial audit, a company's Quick Ratio is assessed to evaluate its short-term financial health and risk of default.
Tags
liquidityfinancial-analysisaccountingcorporate-financefinancial-health
Related Terms
Other terms you might find helpful
Balance Sheet
A balance sheet is a financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.
Current Ratio
The current ratio is a liquidity ratio that measures a company's ability to pay off its short-term liabilities with its short-term assets.
Quick Info
Category:Investing
Difficulty:intermediate
Last Updated:6/20/2025