Brief Definition

Similar to the current ratio but excludes inventory from current assets, as inventory is less liquid.

Further Explanation

Similar to the current ratio but excludes inventory from current assets, as inventory is less liquid.

Quick Ratio: Current Assets – Inventory / Current Liabilities

Example:
If a company has $500,000 in current assets, $300,000 in current liabilities, and $100,000 in inventory:
Quick Ratio: 500,000 – 100,000 / 300,000 = 1.33