what is the quick ratio 
the quick ratio is an indicator of a company s short term liquidity position and measures a company s ability to meet its short term obligations with its most liquid assets since it indicates the company s ability to instantly use its near cash assets assets that can be converted quickly to cash to pay down its current liabilities it is also called the acid test ratio an acid test is a slang term for a quick test designed to produce instant results madelyn goodnight investopediaformula for the quick ratiothere are a few different ways to calculate the quick ratio the most common approach is to add the most liquid assets and divide the total by current liabilities quick ratio quick assets current liabilities begin aligned textbf quick ratio mathbf frac textbf quick assets textbf current liabilities end aligned quick ratio current liabilities quick assets quick assets are defined as the most liquid current assets that can easily be exchanged for cash for most companies quick assets are limited to just a few types of assets quick assets cash ce ms nar where ce cash equivalents ms marketable securities nar net accounts receivable begin aligned textbf quick assets mathbf textbf cash mathbf textbf ce mathbf textbf ms mathbf textbf nar textbf where text ce text cash equivalents text ms text marketable securities text nar text net accounts receivable end aligned quick assets cash ce ms narwhere ce cash equivalentsms marketable securitiesnar net accounts receivable depending on what type of current assets a company has on its balance sheet a company may also calculate quick assets by deducting illiquid current assets from its balance sheet for example consider that inventory and prepaid expenses may not be easily or quickly converted to cash a company may calculate quick assets as follows quick assets tca inventory pe where tca total current assets pe prepaid expenses begin aligned textbf quick assets mathbf textbf tca mathbf textbf inventory mathbf textbf pe textbf where textbf tca text total current assets textbf pe text prepaid expenses end aligned quick assets tca inventory pewhere tca total current assetspe prepaid expenses regardless of which method is used to calculate quick assets the calculation for current liabilities is the same as all current liabilities are included in the formula 