QUICK RATIO Definition

Bookmark and Share

QUICK RATIO (or Acid Test Ratio) is a more rigorous test than the Current Ratio of short-run solvency, the current ability of a firm to pay its current debts as they come due. This ratio considers only cash, marketable securities (cash equivalents) and accounts receivable because they are considered to be the most liquid forms of current assets. A Quick Ratio less than 1.0 implies "dependency" on inventory and other current assets to liquidate short-term debt. Formula: (Cash + Cash Equivalents + Accounts Receivable) / Total Liabilities

Learn new Accounting Terms

DELIVERY NOTE is a document, issued by the suppliers, which accompanies a delivery of goods, specifying their type and quantity.

PAYDOWN is the systematic reduction in principal of a mortgage- or asset-backed security resulting in a series of principal payments, either scheduled or unscheduled.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.