---
title: "Definition of Quick Ratio"
url: https://signalscreener.fr/definition/quick-ratio/
markdown_url: https://signalscreener.fr/definition/quick-ratio.md
description: "Quick Ratio (Acid Test) is like Current Ratio but excludes inventory."
type: glossary-definition
site: Signal Screener
language: en
keywords:
  - "Quick Ratio"
translations:
  es: https://signalscreener.fr/es/definition/quick-ratio.md
  fr: https://signalscreener.fr/fr/definition/quick-ratio.md
  pt: https://signalscreener.fr/pt/definition/quick-ratio.md
  zh: https://signalscreener.fr/zh/definition/quick-ratio.md
---

# Quick Ratio

## What is Quick Ratio?

Quick Ratio (Acid Test) is like Current Ratio but excludes inventory. Shows if company can pay immediate obligations with most liquid assets.

## Think of it like this

Emergency fund test: Bills are $3,000. You have $2,000 cash but $2,000 more in stuff to sell. Quick ratio only counts the $2,000 cash (0.67) - can you pay without selling stuff?

## Formula

```
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
```

- **Current Assets - Inventory**: Only liquid assets (cash, receivables)
- **Current Liabilities**: Bills due within 1 year

## Why it matters

- More conservative than current ratio
- Shows immediate liquidity
- Critical in crisis situations
- Important for companies with slow inventory

## What's a good value?

| Range | Rating | What it means |
|---|---|---|
| < 0.5 | Critical | Serious liquidity problems |
| 0.5-1.0 | Concerning | May struggle in emergency |
| 1.0-1.5 | Healthy | Can handle immediate obligations |
| > 1.5 | Very Strong | Excellent liquidity |

## Real-world example

Software company: Quick ratio 2.0 (no inventory). Retailer: Quick ratio 0.3 (heavy inventory). Service company: Quick ratio 1.2 (mostly receivables).

## Things to watch out for

- Receivables might be uncollectable
- Some industries naturally have low quick ratios
- Seasonal businesses show variation
- Doesn't consider credit lines

---

This is educational content, not financial advice.

Source: [Definition of Quick Ratio](https://signalscreener.fr/definition/quick-ratio/) on Signal Screener. Free to quote and cite with attribution and a link to that URL, which is the canonical one.

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