The quick ratio can be calculated by:
(Current assets – Inventory) divided by total current liabilities
The quick ratio is a measure of liquidity. The greater the value of the quick ratio, the better. It is also important to measure the quick ratio of a company against the quick ratio of other companies within the industry.
Study the current ratio to complement quick ratio
One should also study the current ratio to complement the quick ratio. Both the current ratio and the quick ratio measure the company’s ability to pay off short-term obligations.
Read : Current Ratio