 What
is the Quick Ratio? Definition
The Quick Ratio method is a model for measuring the liquidity of a company.
It is calculated by taking all assets which are quickly convertible into cash,
and to divide the result by all current liabilities. It specifically excludes
inventory. It is an indicator of the extent to which a company can pay current
liabilities without having to rely on the sale of inventory.
Typically, a Quick Ratio of 1:1 or higher is good, and indicates a company
does not have to rely on the sale of inventory to pay the bills.
Calculation of the Quick Ratio. Formula
For the Quick Ratio formula, see the picture on the right.
This ratio is also known as the Acid-test Ratio.
A thing to remember when we use the Quick Ratio is that this model ignores
timing of both cash received and cash paid out.
Take the example of a company with no bills due today, but lots of bills
which are due tomorrow. This company may show a good Quick Ratio, but can
not be considered as having a good liquidity.
Book: Steven M.
Bragg - Business Ratios and Formulas : A Comprehensive Guide -
Book: Ciaran Walsh
- Key Management Ratios -
| |
 Alternate Formula of Quick Ratio?
Which formula is right:
1. The formulae given in the knowledge center
or:
2. Quick Ratio = Current Assets -(Stock+Prepaid Expenses) / Current Liabilities....
|
|
|
|
| |
| |
Why ACID Test Ratio?
Why is the Quick Ratio also called: Acid Test Ratio? Thanks for your ideas......
|
|
|
|
| |
| |
Higher Quick Ratio is not Always Good
Higher quick ratio is not always a good thing. It might indicate that the business is over-trading and it need to manage its working capital, especially accounts receivables management to prevent unnecessary bad debts....
|
|
|
|
| |
| |
Quick Ratio over Time
Often most interesting is to compare the way in which the quick or acid-test ratio develops over time. It's harder to manipulate by bad guys, and even a modest decline in this quick ratio over a period of time may indicate potential problems, ...
|
|
|
|
| |
|
|
|
Quick Ratio Special Interest Group
|
|
|
|
Quick Ratio Education & Events
|
|
|
|
|
Financial Statement Analysis | Ratio Analysis
This presentation provides insights in Financial statement and ratio analysis, and includes the following sectios:
1. Financial analysis
2. ...
Usage (application): Ratio Analysis, Finanical Statement Analysis
|
|
|
|
| |
|
|
3 Minute Introduction to Financial Ratio Analysis: Why do it and What are the Main Types?
Why financial ratio analysis?
1. To compare the financial health of (similar) compani...
Usage (application): Types of Financial Ratios, Financial Ratio Analysis, Financial Ratio Types
|
|
|
|
| |
|
|
Quick Ratio Diagram
Download and edit the 12manage PowerPoint model for limited personal, educational and business use.
Republishing in intranets, websites, books, magaz...
Usage (application): Measuring Liquidity
|
|
|
|
| |
| |
News
Quick Ratio Method
|
|
|
|
| |
News
Quick Ratio Liquidity
|
|
|
|
| |
Videos
Quick Ratio Method
|
|
|
|
| |
Videos
Quick Ratio Liquidity
|
|
|
|
| |
Presentations
Quick Ratio Method
|
|
|
|
| |
Presentations
Quick Ratio Liquidity
|
|
|
|
| |
More
Quick Ratio Method
|
|
|
|
| |
More
Quick Ratio Liquidity
|
|
|
|
|
|
Compare with the Quick Ratio: Current
Ratio | Cash Ratio
| Z-Score |
Discounted Cash Flow |
Free Cash Flow |
Economic Value Added |
CFROI
Return to Management Hub: Finance & Investing
More Management Methods, Models and Theory
|
|
|
|
Special Interest Group Leader
|
|
|
|
|
|
