Show the quick ratio or acid test, Financial Econometrics

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Q. Show the Quick ratio or acid test?

Quick ratio = Current assets less inventories/Current liabilities (times)

This ratio measures immediate solvency of a business as it removes inventories out of the  equation,  which  is  the  item  least  representing  cash,  as  it  needs  to  be  sold.  Normal is around 1: 1 however this varies within different industries.


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