Accounting for IGCSE & O level - Advanced Principles (Section 2 - No. 17)
The quick ratio (acid test or liquid ratio) measures the ability of a business to pay its immediate and short-term debts without having to sell off inventory. The quick ratio formula is:
cash + trade receivables + inventory / current liabilities
current assets / current liabilities
current assets – inventory / current liabilities
current liabilities / (current assets – inventory)
Explanation
The quick ratio formula is current assets – inventory / current liabilities.
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