Quick Ratio Formula
The ability of a company to meet its short term liabilities with liquid assets is termed as quick ratio. It can also be termed as acid test or liquid ratio. Calculation of acid test ratio involves short term investments, cash and accounts receivable.
Acid Test Ratio Formula
Formula used: Acid test Ratio=(Cash + Accounts Receivable + Short term Investments) / (Current Liabilities)
Cash - Money or currency that can be accessed immediately (in rupees)
Accounts Receivable - Money owed to a company by providing the services (in rupees)
Short term Investments - Account in the current assets section of a company balance sheet (in rupees)
Current Liabilities - Company debts or obligations that are due within one year (in rupees)
Quick ratio should be generally 1 : 1 or higher than this. Some times, acid test can also be termed as cash ratio.