The quick ratio evaluates if a company can meet its short-term debts (financial obligations due within a year) using its most liquid assets( cash, marketable securities) which can be quickly converted to cash. It is calculated as (Current Assets - Inventory) / Current Liabilities A quick ratio of 1 or higher indicates good short-term financial health, meaning the company can meet its liabilities. A ratio below 1 suggests potential liquidity issues. The quick ratio is a key metric for assessing a company's financial stability but does not account for all factors influencing liquidity.