Quick Ratio or Acid Test This formula is similar to current ratio but goes further. Subtract inventories, prepaid expenses, and other assets doubtful of collection, from current assets before dividing by current liabilities. Inventories could be illiquid in some cases. The formula is “(current assets minus inventories and assets doubtful of collection) divided by current liabilities.” Or “QUICK ASSETS divided by current liabilities.” Look for a minimum quick ratio of one to one (1 to 1). Another name for the quick ratio is the “acid test.”
