Quick Ratio

   

Definition: Quick Ratio 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.
Also called: Acid Test Ratio.
The QR 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 QR 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.
Another ratio to calculate the liquidity of a firm is the Current Ratio.


   

   

More on quick ratio.
More on financial ratios: Cash Ratio, Interest Coverage Ratio.



   

MBA Brief offers brief, yet very accurate definitions of MBA concepts, frameworks, methods and models. We keep it short and provide some links in case you'd like to learn more around a subject.




© 2020 MBA Brief - Last updated: 13-8-2020  -  Privacy   |   Terms