Quick ratio (acid test)
The acid test, or quick, ratio assesses short-term liquidity after excluding inventory from current assets. The usual FA formula is (current assets − inventory) ÷ current liabilities. It focuses on assets generally easier to turn into cash, but receivables can still be slow or uncollectible. Interpret the result alongside the business model, payment terms, cash flows and prior periods rather than treating one benchmark as universally correct.
Worked example
Current assets of $90,000 include inventory of $30,000; current liabilities are $40,000. The quick ratio is 1.5:1.
Common mistake
A ratio above 1 does not prove that debts can be paid on their due dates. Some definitions also exclude prepayments: follow the specified formula and compare like with like.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Quick ratio, Acid test ratio