Quick Ratio (Acid-Test)

Liquidity
Updated Apr 2026 • Has calculator

A stricter liquidity test that excludes inventory from current assets.

What is Quick Ratio?

The Quick Ratio (also called the Acid-Test Ratio) measures a company's ability to meet its short-term obligations using only its most liquid assets — current assets minus inventory — divided by current liabilities. Unlike the Current Ratio, it excludes inventory because inventory may not be quickly converted to cash. A ratio above 1.0 means the company can cover its current liabilities without selling inventory. It is particularly useful for evaluating manufacturers and retailers where inventory liquidation can be slow.

Formula

Quick Ratio = (Current Assets − Inventory) ÷ Current Liabilities

Worked Example

Worked example — Apple Inc. (AAPL)

FY2024

Step 1  Current assets: $152,987M − Inventory: $7,286M = Quick assets: $145,701M
Step 2  Current liabilities: $176,392M
Step 3  Quick Ratio = $145,701M ÷ $176,392M = 0.83x
Step 4  → Apple's ratio below 1.0 is intentional — its strong operating cash flow eliminates the need for excess liquid assets

Source: Apple 10-K FY2024 (2024-11-01)

Calculate Quick Ratio

Total current assets in millions of USD

Inventory balance in millions of USD

Total current liabilities in millions of USD

Quick Ratio

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Not investment advice.

How to Interpret Quick Ratio

< 0.5
Very Low — potential short-term liquidity stress
0.5 – 1
Below 1.0 — may require asset sales or credit lines
1 – 2
Adequate — can cover current liabilities without inventory
> 2
Strong — highly liquid, may signal excess idle cash

📚 Leverage & Liquidity — Complete the path

  1. D/E Ratio
  2. Current Ratio
  3. Quick Ratio
  4. Cash Ratio
  5. Interest Coverage
Sources
  1. CFA Institute — Financial Reporting and Analysis, 6th ed., Ch. 10
  2. Investopedia — Quick Ratio