Quick Ratio

The Quick Ratio is a measure of how quickly a company can meet its short-term obligations without relying on an asset with a questionable value like inventory. It is an indicator of a company’s short-term liquidity position. Since it indicates the company’s ability to instantly use its near-cash assets—assets that can be converted quickly to cash—to pay down its current liabilities, it is also called the acid test ratio. The quick ratio is calculated as current assets minus inventory, divided by current liabilities.