Quick Ratio (Acid-Test Ratio)
Current assets minus inventory, divided by current liabilities.
What is Quick Ratio (Acid-Test Ratio)?
A stricter liquidity test than the current ratio, because it excludes inventory, which may not sell quickly or at full value. Always lower than or equal to the current ratio.
Quick Ratio (Acid-Test Ratio): a worked example
$4M current assets including $1.5M inventory, $2M current liabilities: ($4M - $1.5M) / $2M = 1.25.
More terms in Economics & Financial Reporting
Business Cycle
The recurring pattern of expansion, peak, contraction, and trough.
Leading, Coincident & Lagging Indicators
Data series that move before, with, or after the business cycle.
Deflation vs. Disinflation
Falling prices versus a slowing rate of price increases.
Currency Valuation & Exchange Rates
What one currency buys of another, and who wins when it moves.
Sovereign Debt
Bonds issued by a national government.
Trade Deficit
A country imports more goods and services than it exports.
Income Statement
Revenue, expenses, and profit over a period of time.
Balance Sheet
Assets, liabilities, and equity at a single point in time.