Final answer:
The Quick Ratio is a liquidity metric to assess a company's immediate ability to cover its current liabilities using its most liquid assets, with an ideal ratio being 1 or higher.
Step-by-step explanation:
The Quick Ratio (also known as the Acid-Test Ratio) is a financial metric used to measure a company’s ability to pay off its current liabilities without needing to sell its inventory or obtain additional financing. The formula for the Quick Ratio is as follows:
- Cash and cash equivalents
- + Marketable Securities
- + Accounts Receivable
- / Current Liabilities
The Quick Ratio is focused on a company's most liquid assets that can be easily converted to cash, omitting inventory which may take longer to liquidate. An ideal Quick Ratio is often considered to be 1 or higher, indicating that the business has enough liquid assets to cover its current liabilities.