Quick Ratio

RECENT NEWS
The Economic Times Mar 6
Nifty will avert any weakness if it manages to crawl back above the 10,300-mark.
The Economic Times Dec 12
The importance of Gujarat poll results stems from the perception that the government’s policies in the coming months would depend on the outcome.
Financial Times Oct 17
Bond trading may be less important but the risks in new areas are underrated
The Hindu Business Line May 24
Will the corporate-style 360-degree feedback tool work in evaluating civil servants?
The Hindu Business Line Feb 9
Governor needs to play it fair, and play it right
SeekingAlpha Jan 13
The Economic Times Jan 4
The distress that demonetisation caused to the citizenry and the pain it spread across different sectors have left a bitter taste, which may not go away too soon.
The Times of India Nov 18
What complicates matters is that the Mistry clan's Shapoorji Pallonji group has an 18.4% stake in the holding company, two-thirds of which is owned by the Tata Trusts, controlled by Ratan Tata.
The Economic Times Nov 17
What complicates matters is that the Mistry clan's Shapoorji Pallonji group has an 18.4% stake in the holding company, two-thirds of which is owned by the Tata Trusts, controlled by Ratan Tata.
The Hindu Business Line Sep 29
Country’s OEMs must do their bit to promote new energy vehicles




RELATED WIKI ARTICLES
TOP CONTRIBUTORS

Quick Ratio is the sum of cash, marketable securities and receivables, divided by current liabilities.

The Quick Ratio, also known as the acid test ratio, is the measure of a company's short-term liquidity. A higher quick ratio indicates better liquidity -- that is, a better ability to meet short-term obligations -- and vice versa. The general formula for quick ratio is


Quick Ratio = (Cash + Marketable Securities + Receivables) ÷ (Current Liabilities)


In essence, the quick ratio, is a conservative version of the current ratio as it only includes the most liquid of the current assets: cash, marketable securities and receivables. The ratio takes into account the fact that certain current assets -- such as pre-paid expenses, taxes -- have already been paid in advance and cannot be converted back into cash. It also discounts inventory as it cannot be easily converted into cash, and that a company may not be able to realize the full carrying value of the inventory if it were to sell it quickly.

Example

  • Company A has $100 million in Current Assets and $50 million in Current Liabilities. The current assets include $10 million in receivables, $5 million in cash and $10 million in short-term marketable securities. Therefore, the company's quick ratio would be 0.5 ((10+5+10)/50).
Retrieved from "/metric/Quick_Ratio"
Please install Flash Player to view this chart.
Please install Flash Player to view this chart.