What financial metric measures a company’s capacity to pay off immediate short-term obligations using only its most liquid current assets?

Explanation

• The Quick Ratio (or Acid-Test Ratio) measures immediate short-term liquidity using formula: $text{Quick Ratio} = frac{text{Cash} + text{Marketable Securities} + text{Receivables}}{text{Current Liabilities}}$.
• Unlike the Current Ratio, the Quick Ratio strictly excludes inventory and prepaid expenses because they cannot be immediately converted to cash.
• A Quick Ratio of 1.0 or higher indicates that a business possesses enough liquid assets to cover current liabilities.