Home>Liquidity Ratio>Quick Ratio

##### Quick Ratio Calculator - Glossary:

Using our quick ratio calculator, helps to compare, measure, understand the overall health of the business.

##### Quick Ratio:

Shows the proportion of quick assets to current liabilities.
In simple words, it is a measure to check how well a company can quickly convert its asset into cash to pay off its current liabilities.

##### How to calculate?

**Formula:**

Quick Ratio = Quick Assets/Current Liabilities

This is a balance sheet component; the values are commonly stated against current assets, current liabilities and total assets.

Note:

Quick Assets = total current assets value - total inventory and any current prepaid assets value.

##### Quick Assets:

Quick assets are current assets that can be converted to cash in short-term. Simply subtract inventory and any current prepaid assets from the current asset total.

##### Current Assets:

This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short term.

##### Inventory:

Inventory is the finished goods that can be sold immediately.

##### Current Liabilities:

This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

##### Example:

Quick ratio for a company with a total current assets of $240,000, merchandise inventory of $40,000 and current liabilities of $105,000 is 1.9 : 1. It means $1.9 of quick assets available to cover each $1 of short-term debt (current liabilities).
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