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.

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.