The Quick Ratio (QR) method is a
model for measuring the liquidity of a company by calculating the
ratio between all assets quickly convertible into cash and all current
liabilities. It specifically excludes inventory. It is an indicator of the
extent to which a company can pay current liabilities without relying
on the sale of inventory.
Typically, a QUR of 1:1 or higher is good
and indicates a company does not have to rely on the sale of inventory to
pay the bills.
For the Quick Ratio formula,
see the picture on the left.
This ratio is also known as the
A thing to remember when using the
QR model is that it ignores timing
of both cash received and cash paid out.
Take the example of a company with no
bills due today, but lots of
bills that are due tomorrow. This company may show a good quick ratio, but can not be considered as having a good
Book: Steven M. Bragg - Business Ratios and Formulas : A Comprehensive
Book: Ciaran Walsh - Key Management Ratios -
Compare also: Current Ratio |
Cash Ratio |
Discounted Cash Flow |
Free Cash Flow |
Economic Value Added |
More financial ratios