Question 1

What is a good quick ratio?

Accepted Answer

Quick ratio of 1.0 or higher is generally healthy, meaning company has enough liquid assets to cover current liabilities. Ratios vary by industry - retail typically lower, professional services higher.

Question 2

What's the difference between quick ratio and current ratio?

Accepted Answer

Quick ratio is more conservative than current ratio because it excludes inventory, which can be hard to liquidate quickly. Quick ratio focuses only on most liquid assets.

Question 3

Why is inventory excluded?

Accepted Answer

Inventory takes time to sell and convert to cash, and may need to be discounted for quick sale. Quick ratio tests immediate liquidity without relying on inventory conversion.

Question 4

Can quick ratio be too high?

Accepted Answer

Very high quick ratios (over 3.0) might indicate excess cash that should be invested in growth opportunities rather than sitting idle. Balance safety with growth.

Quick Ratio Calculator - Acid Test Ratio