All about Quick Ratio
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Alternate Formula of Quick Ratio?
caligo, Member
Which formula is right:
1. The formulae given in the knowledge center
or:
2. Quick Ratio = Current Assets -(Stock+Prepaid Expenses) / Current Liabilities.
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Alternate Formula of Quick RatioJaap de Jonge, Editor In my opinion your formula is wrong. In the quick ratio we are interested in liquidity, so that is why we divide all assets which are quickly convertible into cash (= current assets) by the current liabilities. So current assets / current liabilities.
I don't see why you would want to subtract the stock and add prepaid expenses from/to the current assets. |
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