quick ratio


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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. Also called the Acid test ratio.

Acid-Test Ratio

A measure of a company's ability to meet its short-term obligations using its most liquid assets. It is calculated by subtracting inventories from current assets and dividing the quantity by its current liabilities. A higher acid-test ratio indicates greater short-term financial health. The acid-test ratio is more conservative than the current ratio, which measures much the same thing, because the current ratio excludes the value of inventory. This is because inventory can be less liquid than other current assets. The acid-test ratio thus measures a company's ability to meet obligations in a worst-case scenario. It is also called the quick ratio.

quick ratio

A relatively severe test of a company's liquidity and its ability to meet short-term obligations. The quick ratio is calculated by dividing all current assets with the exception of inventory by current liabilities. Inventory is excluded on the basis that it is the least liquid current asset. A relatively high quick ratio indicates conservative management and the ability to satisfy short-term obligations. Also called acid-test ratio. Compare cash ratio. See also current ratio, net quick assets.

quick ratio

see CURRENT RATIO.
References in periodicals archive ?
If working capital is negative but the quick ratio is high, Cathey can assume something is amiss since, "You can't have a negative working capital when your quick ratio is up," he said.
Analyzing the change in the quick ratio from prior years.
Hence, a firm may also track its liquidity through its quick ratio or the ratio of cash, cash equivalents, marketable securities, and accounts receivable to current liabilities in order to obtain a clearer picture of the true abilities to meet short-term financial obligations.
The average liquidity ratios for construction companies (current ratio X8, quick ratio X9, cash ratio X10) never fell below the accepted minimums throughout the entire period.
Figure 2 shows that only minor differences in the quick ratio are evident when comparing foreign-based companies against the same ratios developed using US GAAP.
Debt equity ratio (1.55) and current ratio (3.58) have the lowest standard deviation followed by quick ratio (4.13) and dividend per share (9.27).
* Quick Ratio : Current Assets - (Inventory + Prepaid Expenses) / Current Liabilities
This results in an exceptionally strong quick ratio (cash and investments compared to liabilities less deferred revenue) of 17.1.
Quick Ratio = (Cash + ST Receivables) / Current Liabilities;
Further the company's quick ratio decreased to 1.8 in FY2013 from 2.1 in FY2012 and the cash ratio declined to 0.6 in FY2013 from 1 in FY2012.
The car's immediate response to steering inputs -- it uses power rack-and-pinion steering with a quick ratio -- can quicken a driver's pulse during sudden maneuvers.
(1997) find that the users of currency derivatives have lower quick ratio values than that of the nonusers.