1. What is the Quick Ratio?

The Quick Ratio (also called Acid-Test Ratio) measures a company's ability to meet its short-term obligations with its most liquid assets. It's a more conservative measure than the current ratio as it excludes inventory from current assets.

2. How Does the Calculator Work?

The calculator uses the Quick Ratio formula:

Where:

• \( Liquid\ Assets \) — Cash and assets that can be quickly converted to cash (USD)
• \( Short\text{-}Term\ Liabilities \) — Debts and obligations due within one year (USD)

Explanation: The ratio shows how many dollars of liquid assets are available for each dollar of short-term liabilities.

3. Importance of Quick Ratio

Details: A ratio of 1 or higher indicates the company can fully cover its short-term liabilities with liquid assets. Lower values may indicate liquidity problems.

4. Using the Calculator

Tips: Enter liquid assets and short-term liabilities in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good Quick Ratio?
A: Generally, 1.0 or higher is good, but ideal ratios vary by industry. Some industries can operate safely with lower ratios.

Q2: What's included in liquid assets?
A: Cash, cash equivalents, marketable securities, and accounts receivable. Inventory is excluded.

Q3: How does Quick Ratio differ from Current Ratio?
A: Current Ratio includes all current assets (including inventory), while Quick Ratio focuses only on the most liquid assets.

Q4: Can Quick Ratio be too high?
A: Yes, extremely high ratios may indicate inefficient use of assets (too much cash not being invested in growth).

Q5: How often should Quick Ratio be calculated?
A: Typically calculated quarterly with financial statements, but can be monitored more frequently if liquidity is a concern.