Quick ratio glossary
Plain-language definitions for every term used on this site, in alphabetical order.
Every term on the calculator, methodology page, sector pages, and comparison pages is defined here. Definitions are written for analysts and operators, not students; the goal is to settle disagreements about scope and inclusion, not to teach accounting fundamentals.
Acid-test ratio
Synonym for the quick ratio. Named after the 19th-century assayer's test for gold purity. Cash, marketable securities, and accounts receivable divided by current liabilities.
Accounts receivable (AR)
Amounts customers owe the business for goods or services delivered on credit. Reported net of an allowance for doubtful accounts. Sits in current assets. Included in the quick ratio numerator.
AR aging
Schedule that buckets receivables by days outstanding (current, 30, 60, 90, 90+). Older balances are less likely to be collected. Credit analysts use AR aging to stress-test the quick ratio.
AR factoring
Sale of receivables to a third party (the factor) at a discount, in exchange for immediate cash. Removes AR from the balance sheet, raising the cash ratio but leaving the quick ratio roughly unchanged in arithmetic terms.
ASC 842
US GAAP lease accounting standard (effective 2019) that brings operating lease liabilities on balance sheet. The current portion sits in current liabilities, which can depress the quick ratio for lease-heavy firms like retailers and restaurants.
Basel III
Global regulatory framework for bank capital and liquidity. Defines the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and CET1 capital ratio that replace the quick ratio for banking analysis.
Cash
Currency on hand plus demand deposits at financial institutions. The most liquid asset on the balance sheet. The first line item in the quick ratio numerator.
Cash conversion cycle (CCC)
Days inventory plus days receivables minus days payables. Measures how many days cash is tied up between paying suppliers and collecting from customers. Negative CCC means suppliers finance the working capital. Read alongside the quick ratio for liquidity context.
Cash ratio
Cash plus marketable securities divided by current liabilities. The strictest of the three liquidity ratios. Excludes accounts receivable.
CET1 (Common Equity Tier 1)
Highest-quality bank capital: common shares plus retained earnings, net of certain regulatory deductions. Used by regulators to measure bank solvency. Minimum CET1 capital ratio is 4.5% of risk-weighted assets under Basel III.
Covenant
Contractual obligation in a loan agreement. Maintenance covenants are tested every quarter; incurrence covenants are tested only when the borrower takes a specific action. Quick ratio floors are typical maintenance covenants in mid-market loans.
Current assets
Balance sheet line item: assets expected to be converted to cash or consumed within 12 months. Includes cash, marketable securities, accounts receivable, inventory, and prepaid expenses.
Current liabilities
Balance sheet line item: obligations due within 12 months. Includes accounts payable, accrued expenses, short-term debt, current portion of long-term debt, and current portion of operating lease liabilities. The denominator of the quick ratio.
Current ratio
Total current assets divided by current liabilities. Broader than the quick ratio because it includes inventory and prepaid expenses.
Deferred revenue
Cash received from customers for services not yet delivered. Sits in current liabilities for subscription businesses, depressing the quick ratio even when cash collections are strong.
Equity cure
Provision in a loan agreement allowing the sponsor or parent to contribute cash to bring the borrower back into covenant compliance. Limits typically apply (often four cures over the life of the loan).
High-Quality Liquid Assets (HQLA)
Assets that can be quickly converted to cash with little or no loss of value during a stress event. Used in the Basel III LCR calculation for banks.
Liquidity Coverage Ratio (LCR)
Basel III bank liquidity ratio: HQLA divided by 30-day net cash outflows under stress. Minimum 100%. Replaces the quick ratio for banking analysis.
Marketable securities
Short-term investments convertible to cash within 90 days at par or near-par value. Reported in current assets, often labelled 'short-term investments'. Included in the quick ratio numerator.
Net Stable Funding Ratio (NSFR)
Basel III bank ratio: available stable funding divided by required stable funding over a one-year horizon. Minimum 100%. Complements the LCR.
Prepaid expenses
Payments made for goods or services to be received in the future (insurance, rent, software subscriptions). Sit in current assets but are excluded from the quick ratio numerator because they cannot be converted to cash.
Quick assets
Cash plus marketable securities plus accounts receivable. The numerator of the quick ratio. Also called near-cash assets or liquid assets.
Quick ratio
Quick assets divided by current liabilities. Also called the acid-test ratio. Measures whether a firm can cover current liabilities from near-cash assets without selling inventory.
Restricted cash
Cash held for a specific purpose (escrow, debt-service reserves, regulatory deposit). Not freely available to pay current liabilities and should be excluded from the quick ratio numerator.
Revolver
Revolving credit facility. Undrawn revolver capacity is liquidity that does not appear in the quick ratio but is available on demand. Credit analysts add revolver headroom to quick assets when stress-testing.
Working capital
Current assets minus current liabilities. An absolute dollar amount rather than a ratio. Loan covenants frequently specify minimum working capital alongside or instead of a quick ratio floor.
Verified June 2026. Source: Subramanyam, Financial Statement Analysis, 11th Edition; Corporate Finance Institute; BIS Basel III. Definitions cross-checked against the source registry.