Business and Personal Finance Dictionary

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• QUICK RATIO
  
  The quick ratio, sometimes called the acid test ratio, is similar to the current ratio, but is considered a more reliable indicator of a company's ability to meet its short-term financial obligations. Because inventory can sometimes be difficult to liquidate, this ratio deducts inventory from your assets before computing the ratio. Potential creditors like to use this ratio because it reveals a company's ability to pay off under the worst possible conditions. To calculate it, take current assets, subtract inventories, then divide by current liabilities.
  
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