Quick ratio


Quick ratio measures the short-term liquidity of an enterprise, ie. whether it will be able to pay back, if required to, its current liabilities with its liquid assets or not.

Source: Tavaga Research

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Quick ratio is also called the acid test ratio, as an acid test is a term used for an event that determines if something is true or successful.

For a company, the higher the quick ratio, the higher is the ability of the company to meet its short-term liquidity requirements.