QUICK RATIO

In business, the quick ratio is obtained by subtracting inventories from current assets and then dividing by current liabilities.

 

Generally, the quick ratio should be 1:1 or higher; however, this varies widely by industry. In general, the higher the ratio, the greater the company’s liquidity (i.e. the better able to meet current obligations using liquid assets). The quick ratio is also known as the acid test ratio.

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