# Quick Ratio

Knowledge Center

## Summary, forum, best practices, expert tips and information sources.

17 items • 406.204 visits

 Summary

### What is the Quick Ratio? Definition

The Quick Ratio method is a model for measuring the liquidity of a company. It is calculated by taking all assets which are quickly convertible into cash, and to divide the result by all current liabilities. It specifically excludes inventory. It is an indicator of the extent to which a company can pay current liabilities without having to rely on the sale of inventory.

Typically, a Quick Ratio of 1:1 or higher is good, and indicates a company does not have to rely on the sale of inventory to pay the bills.

### Calculation of the Quick Ratio. Formula

For the Quick Ratio formula, see the picture on the right.

This ratio is also known as the Acid-test Ratio.

A thing to remember when we use the Quick Ratio is that this model ignores timing of both cash received and cash paid out.

Take the example of a company with no bills due today, but lots of bills which are due tomorrow. This company may show a good Quick Ratio, but can not be considered as having a good liquidity.

Book: Steven M. Bragg - Business Ratios and Formulas : A Comprehensive Guide

Book: Ciaran Walsh - Key Management Ratios

 Special Interest Group
 Quick Ratio Special Interest Group. Special Interest Group (32 members)
 Forum

 Start a new topic about Quick Ratio

 Quick Ratio over Time Often most interesting is to compare the way in which the quick or acid-test ratio develops over time. It's harder to manipulate by bad guys, and even a modest decline in this quick ratio over a perio... 14
 Quick Ration in Banking Please suggest me, how to calculate quick ratio in banking? Thank you...... 10
 Why ACID Test Ratio? Why is the Quick Ratio also called: Acid Test Ratio? Thanks for your ideas...... 7
 Higher Quick Ratio is not Always Good Higher quick ratio is not always a good thing. It might indicate that the business is over-trading and it need to manage its working capital, especially accounts receivables management to prevent unne... 7
 🔥 NEW Alternate Formula of Quick Ratio? Which formula is right: 1. The formulae given in the knowledge center or: 2. Quick Ratio = Current Assets -(Stock+Prepaid Expenses) / Current Liabilities.... 3   2 comments
 Best Practices

The best, top-rated topics about the Quick Ratio. Here you will find the most valuable ideas and practical suggestions.

 Expert Tips
 Information Sources

Various sources of information regarding the Quick Ratio. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.

 Financial Statement Analysis | Ratio AnalysisRatio Analysis, Finanical Statement AnalysisThis presentation provides insights in Financial statement and ratio analysis, and includes the following sectios: 1. F... 3 Minute Introduction to Financial Ratio Analysis: Why do it and What are the Main Types?Types of Financial Ratios, Financial Ratio Analysis, Financial Ratio TypesWhy financial ratio analysis? 1. To compare the financial health of (similar) companies (which one is doin... Quick Ratio DiagramMeasuring LiquidityDownload and edit the 12manage PowerPoint model for limited personal, educational and business use. Republishing in int...

 News Videos Presentations Books Academic More

Compare with the Quick Ratio: Current Ratio  |  Cash Ratio  |  Z-Score  |  Discounted Cash Flow  |  Free Cash Flow  |  Economic Value Added  |  CFROI