Quick Ratio

Sometimes called the acid test, the quick ratio is an indicator of a company's ability to meet its short-term liabilities. It is the sum of a company's cash plus accounts receivable plus short-term investments divided by its current liabilities. The higher the number the healthier the company's position. The quick ratio is similar to current ratio. But current ratio is a less stringent test because it adds inventory, which may not always be easy to sell quickly, to cash, accounts receivable and short-term investments before dividing by current liabilities.