Quick ratio

Quick ratio removes inventory from current assets before dividing by current liabilities, testing whether liquid assets alone can cover short-term obligations.

ByHoang TruongUpdated June 30, 2026

FrameworkRatio analysis

See it move

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Current assets of €480,000 include €160,000 of inventory. Removing that inventory leaves €320,000 of liquid assets — cash and receivables. Dividing by current liabilities of €200,000 gives a quick ratio of 1.6: €1.60 of liquid assets for every €1 owed in the short term. A ratio at or above 1 signals liquid assets alone can cover short-term claims without selling any stock.

Where it fits

SubjectFinancial AccountingCoreTopicFinancial Statement Analysis & RatiosCore

The formula

LaTeX

\text{Quick Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}

Variables

$C u r r e n t A sse t s$: Total current assets including cash, receivables, inventory, and prepayments (€)
$I n v e n t or y$: Closing inventory excluded because it is the least liquid current asset (€)
$C u r r e n t L iabi l i t i es$: Obligations due within twelve months (€)

Also called the acid-test ratio; prepayments are sometimes also excluded