Plain-English definitions, reviewed by an independent investor
Quick Ratio
The quick ratio is a stricter solvency test that excludes inventory from current assets.
The quick ratio is a stricter solvency test that excludes inventory from current assets.
Quick Ratio = (Current Assets − Inventory) ÷ Current Liabilities
Why it matters
It asks whether you could pay bills with cash and receivables alone.
Common confusion
For firms with slow inventory, quick is the honest number.
Frequently Asked Questions
Why drop inventory?
Inventory may not sell fast or at full price in a pinch.
Higher or lower than current?
Always lower or equal, since it removes a current asset.