Quick Ratio

Knowledge Center

• About
• Home
• Dictionary
• Encyclopedia
• Question?
• Views

• Register
• Log in
• Help

• Change & Organization
• Communication & Skills
• Decision-making & Valuation
• Ethics & Responsibility
• Finance & Investing
• HRM
• Knowledge & Intangibles
• Leadership
• Marketing
• Program & Project
• Strategy
• Supply Chain & Quality

Measuring the liquidity of a company. Explanation of Quick Ratio.

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 -

Quick Ratio Forum   Alternate Formula of Quick Ratio? Which formula is right: 1. The formulae given...           Why ACID Test Ratio? Why is the Quick Ratio also called: Acid Test Rati...           Quick Ration in Banking Please suggest me, how to calculate quick ratio in...           Higher Quick Ratio is not Always Good Higher quick ratio is not always a good thing. It ...           Quick Ratio over Time Often most interesting is to compare the way in wh...         Begin a new topic

Quick Ratio Special Interest Group Special Interest Group

Quick Ratio Education & Events Find Trainings, Seminars and Events

Best Practices - Quick Ratio Premium

Expert Tips - Quick Ratio Premium

Resources - Quick Ratio Premium Financial Statement Analysis | Ratio Analysis This presentation provides insights in Financial s... Usage (application): Ratio Analysis, Finanical Statement Analysis   3 Minute Introduction to Financial Ratio Analysis: Why do it and What are the Main Types? Why financ... Usage (application): Types of Financial Ratios, Financial Ratio Analysis, Financial Ratio Types   Quick Ratio Diagram Download and edit the 12manage PowerPoint model fo... Usage (application): Measuring Liquidity     News about Quick Ratio Method         News about Quick Ratio Liquidity         Videos about Quick Ratio Method         Videos about Quick Ratio Liquidity         Presentations about Quick Ratio Method         Presentations about Quick Ratio Liquidity         More about Quick Ratio Method         More about Quick Ratio Liquidity

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

Return to Management Hub: Finance & Investing

More Management Methods, Models and Theory