# Quick ratio

In

finance , the**Acid-test**or**quick ratio**or**liquid ratio**measures the ability of a company to use its "near cash " orquick asset s to immediately extinguish or retire its current liabilities.Quick asset s include thosecurrent asset s that presumably can be quickly converted to cash at close to theirbook value s. Such items are cash, cash equivalents such as marketable securities, and someaccounts receivable . This ratio indicates a firm's capacity to maintain operations as usual with current cash ornear cash reserves in bad periods. As such, this ratio implies aliquidation approach and does not recognize the revolving nature of current assets and liabilities. The ratio compares a company's cash and short-term investments to the financial liabilities the company is expected to incur within a year's time.$mbox\{Current\; Ratio\}\; =\; frac\; \{mbox\{Current\; Assets\; \{mbox\{Current\; Liabilities$

OR

$mbox\{Quick\; (Acid\; Test)\; Ratio\}\; =\; \{mbox\{Current\; Assets\}\; -\; mbox\{(Inventory\}+\; mbox\{Staff\; Salaries\}\; +\; mbox\{Supplies\}\; +mbox\{Prepayments)\}over\; mbox\{Current\; Liabilities\}\; -\; mbox\{Bank\; overdraft$

Generally, the acid test ratio should be 1:1 or better, however this varies widely by industry. [

*cite book*]

last=Tracy

first=John A.

title=How to Read a Financial Report: Wringing Vital Signs Out of the Numbers

pages=pp. 173

year=2004

publisher=John Wiley and Sons

isbn=0471646938**ee also***

Current Ratio "*Accounting liquidity "**References**

*Wikimedia Foundation.
2010.*

### Look at other dictionaries:

**quick ratio**— See acid test ratio. Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010 … Law dictionary**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 … Financial and business terms**Quick ratio**— Indicator of a company s financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. This ratio provides information regarding the firm s liquidity and ability to meet its obligations.… … Financial and business terms**Quick Ratio**— An indicator of a company s short term liquidity. The quick ratio measures a company s ability to meet its short term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. The quick ratio is… … Investment dictionary**Quick Ratio**— Liquiditätsgrade sind insbesondere in der Unternehmensfinanzierung und der Finanzbuchhaltung verwendete betriebswirtschaftliche Kennzahlen, mit denen die Fähigkeit eines Unternehmens, seinen Zahlungsverpflichtungen fristgerecht nachzukommen,… … Deutsch Wikipedia**quick ratio**— Il quick ratio è un indice che mostra il grado di solvibilità di un impresa e, di conseguenza, fornisce indicazioni sull ammontare del credito che può essere rilasciato all impresa stessa. Il quick ratio indica il rapporto tra contanti, crediti … Glossario di economia e finanza**quick ratio**— (Economics) ratio between the current debts of a company and its current liquid assets (measures the company s ability to fulfill its financial obligations over the short term) … English contemporary dictionary**quick ratio**— See: liquid ratio … Accounting dictionary**quick ratio**— An alternative term for the *acid test ratio … Auditor's dictionary**quick ratio**— /kwɪk reɪʃiəυ/ noun same as liquidity ratio … Dictionary of banking and finance