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Definition
Quick ratio, also called the acid-test ratio, measures whether a business can cover its short-term liabilities using its most liquid assets — cash, near-cash and receivables — excluding stock, which cannot always be turned into cash quickly. It is stricter than the current ratio.
In plain terms
It answers a blunt question: if you could not sell any more stock, could you still pay the bills falling due this year? A quick ratio near 1 suggests yes; well below 1 suggests you are relying on selling inventory to stay liquid.
Why it matters
For stock-heavy businesses the quick ratio can look very different from the current ratio, and it is often the more honest liquidity test. See current and quick ratio explained.
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