Quick Ratio

The quick ratio, also known as the acid-test ratio, measures a company's ability to cover its short-term obligations using its most liquid assets—cash, marketable securities, and accounts receivable—without relying on inventory. It indicates financial health and liquidity, with a ratio of 1 or higher typically signifying that the company can meet its immediate liabilities comfortably. Essentially, it assesses how quickly a company can pay off its short-term debts using assets that can be quickly converted to cash.