Quick Ratio (Acid-Test Ratio)
Returns the quick ratio for a company, which measures its ability to pay short-term obligations using only the most liquid assets (excluding inventory).
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio vs Current Ratio
| Ratio | Includes Inventory | Use Case |
|---|---|---|
| Quick Ratio | No | Strict liquidity test |
| Current Ratio | Yes | General liquidity |
Interpretation
| Range | Interpretation |
|---|---|
| > 1.0 | Can pay short-term debts without selling inventory |
| 0.5 - 1.0 | May need to sell some inventory |
| < 0.5 | Potential liquidity concerns |
Notes
- More conservative than current ratio
- Particularly important for companies with slow inventory turnover
- Retailers typically have lower quick ratios
Examples
=quick_ratio("AAPL")=quick_ratio("MSFT")=quick_ratio("WMT")=quick_ratio(A1)When to Use
- Conservative liquidity analysis
- Companies with slow-moving inventory
- Credit analysis and lending decisions
- Comparing liquidity across industries
- Stress-testing financial health
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Need general liquidity measure | current_ratio() |
| Cash-only analysis | cash_ratio() |
| Historical liquidity data | hf_quick_ratio() |
| Service companies (no inventory) | current_ratio() |
Common Issues & FAQ
Q: Why is quick ratio lower than current ratio? A: Quick ratio excludes inventory, so it's always less than or equal to current ratio. The difference shows how much liquidity depends on inventory.
Q: Why do retailers have low quick ratios? A: Retailers hold significant inventory as part of their business model. A low quick ratio is normal for retail companies.
Q: What if quick ratio and current ratio are similar? A: Similar values indicate the company holds little inventory relative to other current assets (common for service companies).
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