The quick ratio is a financial ratio used to gauge a company's liquidity. The quick ratio is also known as the acid test ratio.

The quick ratio compares the total amount of cash + marketable securities + accounts receivable to the amount of current liabilities. If a company has cash + marketable securities + accounts receivable with a total of $1,000,000 and the company's total amount of current liabilities is $1,200,000, its quick ratio is 0.83 to 1. ($1,000,000 divided by $1,200,000 = 0.83)

The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not turn to cash quickly.

Studies show that exam questions are a great way to learn and retain important information. Gain access to our 1,700 accounting exam questions (and answers) when you upgrade to PRO.