Quick Ratio

quick ratio

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

Quick Ratio

Example Accounts Limited has a Quick Ratio of 6 calculated as (£247,650-£10,000)/£39,250.