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Balance sheet

Quick ratio (acid test)

Cash plus money owed by customers, divided by bills due within a year. It is stricter than the current ratio because it leaves out inventory.

The quick ratio is the "acid test" of whether a company can pay its short-term bills. It leaves out inventory because, in a crunch, inventory can be hard to sell for what the books say it is worth.

Above 1.0 is a strong position. Below 0.5 is a real concern for businesses that need a lot of equipment and have cash that comes in unevenly through the year.

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