Quick ratio
Liquidity counting only what could become cash quickly — inventory excluded. Two firms with the same current ratio can differ sharply here.
Where you will meet it
Quick ratio appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Work out liquidity, solvency and activity ratios and explain what they mean
“Liquidity ratios ask whether short-term obligations can be met — the current ratio, and the quick ratio which strips out inventory as the least certain current asset.”
- Work out liquidity and activity ratios and explain what they mean
“Liquidity ratios test whether near-term obligations can be met: the current ratio compares current assets with current liabilities, the quick ratio excludes inventory as the least reliably realisable item, and the cash ratio keeps only cash and marketable securities.”
See also
Practise it
Practise quick ratio until it is automatic: questions that explain every wrong option.
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