Quick Ratio

The quick ratio, also known as the acid-test ratio, is a liquidity metric that measures a company's ability to meet its short-term liabilities using its most liquid assets. It is calculated by dividing a company’s quick assets (cash, marketable securities, and receivables) by its current liabilities. A quick ratio greater than 1 indicates that a company has enough liquid assets to cover its short-term obligations without needing to sell inventory. This ratio is particularly useful for assessing a company’s short-term financial health.

Example

A company has $200,000 in cash and receivables and $150,000 in current liabilities, resulting in a quick ratio of 1.33, suggesting good short-term liquidity.