quick ratio

A commonly used, but not always accurate, proxy for a firm's liquidity. The quick ratio is calculated by subtracting inventory from current assets and then dividing the result by current liabilities.

Sometimes called the acid test ratio. American Banker Glossary

————

indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories ( inventory), divided by current liabilities. This ratio provides information regarding the firm's liquidity and ability to meet its obligations. Also called the acid test ratio. Bloomberg Financial Dictionary

————

See acid test ratio. Dresdner Kleinwort Wasserstein financial glossary

* * *

quick ratio quick ratio ➔ ratio

* * *

   Sometimes called the acid test, the quick ratio is an indicator of a company's ability to meet its short-term liabilities. It is the total of a company's cash plus accounts receivable plus short-term investments divided by its current liabilities. The higher the number, the healthier the position, and within an industry, high quick ratios suggest relatively high liquidity. The quick ratio is similar to the current ratio, which is a less stringent test because it adds inventory (which may not always be easy to sell quickly) to cash, accounts receivable and short-term investments before dividing by current liabilities.

   ► See also Current Ratio.

* * *

quick ratio UK }} US }} noun [S] ACCOUNTING

► ACID TEST RATIO(Cf. ↑acid test ratio)