Quick ratio

Total current assets minus closing stock) divided by total current liabilities. The quick ratio, also known as the acid test, is very similar to the current ratio, but excludes stock. It tests a business’s ability to pay short-term debt from immediately convertible or liquid assets (ie assets that can be readily converted to cash such as debtors, bank or cash on hand). A ratio higher than 1 means a business should be able to pay its short-term liabilities immediately or within a very short timeframe. If the ratio is very high, it may mean that the business has few current liabilities or that the quick/cash assets are very high. A ratio lower than 1 means a business could have difficulty meeting all of its short-term liabilities.