Formula
Quick Ratio = (Current Assets – Inventory) ÷ Current Liabilities
Calculation Example
If a company has $500,000 in current assets, $200,000 in inventory, and $300,000 in current liabilities, Quick Ratio = (500,000 – 200,000) ÷ 300,000 = 1.0
Data Source
Balance sheets, financial statements
Tracking Frequency
Monthly, Quarterly
Optimal Value
A ratio of 1 or higher is generally considered good.
Minimum Acceptable Value
A Quick Ratio below 1 suggests liquidity issues.
Benchmark
Industry average: Retail ~0.5-1.0, Manufacturing ~1.0-1.5, Tech ~1.5+
Recommended Chart Type
Bar chart (to compare across industries), Line chart (to track trends)
How It Appears in Reports
Displayed in financial reports to assess short-term liquidity.
Why Is This KPI Important?
Indicates a company’s ability to cover immediate financial obligations.
Typical Problems and Limitations
Does not consider future cash flow or credit availability.
Actions for Poor Results
Improve cash reserves, reduce short-term liabilities, optimize working capital.
Related KPIs
Current Ratio, Working Capital, Cash Flow
Real-Life Examples
A retail company improved its Quick Ratio from 0.7 to 1.2 by optimizing inventory management.
Most Common Mistakes
Focusing only on Quick Ratio without considering industry-specific norms.
