Liquidity
Quick ratio
Liquid assets over obligations due within a year, with inventory and prepayments excluded.
The Formula
QR = (cash + receivables) / current liabilities
Liquid assets over obligations due within a year, with inventory and prepayments excluded.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| QR | Quick ratio | ratio | Acid test ratio. |
| C | Cash | currency | Cash and cash equivalents. |
| AR | Receivables | currency | Trade receivables convertible on normal terms. |
| CL | Current liabilities | currency | Obligations due within twelve months. |
What Each Symbol Means
QRratio
Quick ratio
Acid test ratio.
Ccurrency
Cash
Cash and cash equivalents.
ARcurrency
Receivables
Trade receivables convertible on normal terms.
CLcurrency
Current liabilities
Obligations due within twelve months.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate quick ratio page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Quick Ratio, filed under Business. Every number the guide produces comes from substituting into this one line.