Quick Ratio
How many times assets that can be turned into cash right away, excluding inventory, cover short-term debt — a stricter measure of ability to pay than the current ratio.
Quick Ratio = (Current Assets − Inventory) ÷ Current Liabilities
At 1 or above, the company is seen as able to handle short-term debts without relying on inventory.
In plain terms
The current ratio counts inventory as part of "assets to be used soon," but inventory doesn't turn into cash right away if it doesn't sell.
The quick ratio leaves out inventory and looks at whether short-term debt can be covered with only the things that really turn into cash fast, like cash and receivables. It's a stricter version of the current ratio.
What it tells you
It shows whether a company can cover its immediate debts even if we assume its inventory can't be sold.
In inventory-heavy industries (retail, manufacturing), if the current ratio looks fine but the quick ratio is low, it signals that much of the ability to pay is tied up in inventory.
Formula
Quick Ratio = (Current Assets − Inventory) ÷ Current Liabilities
What high or low means
At 1 or above, the company is seen as able to handle short-term debts without relying on inventory.
A large gap between the current ratio and the quick ratio means short-term assets depend that much on inventory.
The quick ratio is also a value at a single point in time, so it swings with the cash schedule. Normal levels differ by industry (businesses where inventory is central come out low), so it can't be compared across different industries.
If the money owed to the company (accounts receivable) is of poor quality, actual ability to pay can be weaker even with a high quick ratio.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.