Quick (Acid Test) Ratio – The bigger the numerical ratio the better.
This is one of the Liquidity Ratios which lets you know if a company is able to pay its debt. It helps answer the question “Can the company pay its bills?”
Calculate this ratio using the below equation. Values in the equation can be acquired from the Balance Sheet.
Equation:
Quick Ratio = [(Current Assets) – (Inventories)] ÷ (Current Liabilities)
Equation results indicate whether there are very liquid short-term assets sufficient to cover short-term debt.