Quick Ratio
An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company.
The quick ratio is calculated as:
Also known as the "acid-test ratio."
Investopedia Commentary
The quick ratio is more conservative than the current ratio, a more well-known liquidity measure, because it excludes inventory from current assets. Inventory is excluded because some companies have difficulty turning their inventory into cash. In the event that short-term obligations need to be paid off immediately, there are situations in which the current ratio would overestimate a company's short-term financial strength.
Related Links
The Dynamic Current Ratio
Lady Godiva Accounting Principles
See also: Cash, Current Assets, Current Liabilities, Current Ratio, Illiquid, Inventory, Liquidity, Receivables
quick ratio