What is the acceptable range for a quick ratio?

The acceptable range for a quick ratio is typically between 1 and 2. The quick ratio, also known as the acid-test ratio, is a measure of a company's ability to meet its short-term obligations using its most liquid assets. It is calculated by taking current assets minus inventories and dividing that number by current liabilities. A quick ratio of 1 or higher suggests that a company has enough liquid assets to cover its current liabilities, indicating good short-term financial health.

A quick ratio between 1 and 2 can be seen as optimal, as it indicates that the company has a comfortable cushion to cover its liabilities without relying on the sale of inventory, which may not be easily liquidated. Ratios above this range might indicate excessive liquidity, which could imply underutilized assets. A ratio below 1 would suggest potential liquidity issues, indicating that the company may struggle to cover its short-term debts. Therefore, the range between 1 and 2 is most commonly regarded as an ideal zone for maintaining financial stability.