The Quick Ratio (acid-test ratio) measures immediate liquidity: (current assets – inventory) / current liabilities. By excluding inventory (which may not convert quickly to cash), it's a more conservative liquidity measure than the current ratio. A quick ratio of 1.0 means the company can pay all current liabilities without selling inventory. Below 1.0 may indicate liquidity stress; well above 1.0 may indicate inefficient capital deployment. Service businesses naturally have higher quick ratios (little inventory); retailers and manufacturers have lower quick ratios. Trend analysis — quick ratio over multiple quarters — reveals whether liquidity is improving or deteriorating.
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Quick Ratio
August 22, 2026 · Aditya Gupta
Accounting
Related terms
Accounts Payable
Accounts Payable (A/P) is money a company owes to suppliers for goods or services received but not yet…
Accounts Receivable
Accounts Receivable (A/R) is money owed to a company by customers for goods or services delivered on credit.…
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