What is the Quick Ratio?
The quick ratio is similar to the current ratio however it excludes stock from the calculation. This is because stock can be hard to convert into cash quickly to pay creditors.
How is the Quick Ratio Calculated?
Current Ratio = (Current Assets-Stock)/Current Liabilities
An Example of the Quick Ratio
Example Accounts Limited has a Quick Ratio of 6 calculated as (£247,650-£10,000)/£39,250.
