Accounting
Intermediate

Quick Ratio (Acid Test)

A stricter liquidity test that excludes inventory, which can be slow to convert to cash.

Formula

QR=Current Assets−InventoryCurrent LiabilitiesQR = \dfrac{Current\ Assets - Inventory}{Current\ Liabilities}

Variables

QRQuick ratio
InventoryStock on hand

Example

($150k − $60k) / $75k = 1.2

Did You Know?

The name “acid test” comes from the fast, decisive gold-purity test of the same name.

liquidityacid testsolvency