By VestAI Research | Last updated: March 2026
Quick Ratio: Meaning, Definition & Indian Stock Market Examples
(Current assets − inventory) ÷ current liabilities — stricter liquidity test.
What is Quick Ratio?
The Quick Ratio (also called the Acid-Test Ratio) = (Current Assets − Inventory − Prepaid Expenses) ÷ Current Liabilities. By excluding inventory, it gives a more conservative view of a company's ability to meet short-term obligations with its most liquid assets.
Quick Ratio — Indian Stock Market Example
IT services companies typically have quick ratios well above 1 since their current assets are mostly cash and receivables with minimal inventory. Manufacturing companies with large raw material inventories may have current ratios above 2 but quick ratios below 1.
Analyse any Indian stock using Quick Ratio
Ask Orion: “What is the Quick Ratio for [stock] and how does it compare to peers?”
Analyse with OrionFrequently Asked Questions about Quick Ratio
What is a good quick ratio?
A quick ratio above 1 is generally safe — the company can meet all immediate liabilities using its most liquid assets. Below 0.5 is a warning sign. However, context matters: retail and consumer businesses often have lower quick ratios due to inventory-heavy models.
Which is more important: current ratio or quick ratio?
Both matter. Current ratio shows overall liquidity; quick ratio shows whether the company can survive without liquidating inventory. For businesses with perishable or slow-moving inventory (retail, manufacturing), the quick ratio is more critical.
Related Terms
Current Ratio
Current assets ÷ current liabilities — measures short-term liquidity.
Working Capital
Current assets minus current liabilities — the buffer for day-to-day operations.
Liquidity
Ease of buying/selling an asset quickly at fair price without significantly moving the market.
Cash Conversion Cycle
Days to convert inventory & receivables to cash — measures working capital efficiency.
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