Term of the Day: Quick Ratio

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	INVESTOPEDIA Term Of The Day November 24, 2015 Quick Ratio The quick ratio is an indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. For this reason, the ratio excludes inventories from current assets, and is calculated as follows: Quick ratio = (current assets – inventories) / current liabilities, or = (cash and equivalents + marketable securities + accounts receivable) / current liabilities The quick ratio measures the dollar amount of liquid assets available for each dollar of current liabilities. Thus, a quick ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current liabilities. The higher the quick ratio, the better the company's liquidity position. Also known as the "acid-test ratio" or "quick assets ratio." Breaking It Down: For an asset to be liquid it needs an established market with enough participants to absorb the selling without... Read More Related to "Quick Ratio" Liquidity Measurement Ratios: Quick Ratio The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current... Read More What is the difference between the current ratio and the acid test ratio? The acid-test ratio and the current ratio are two commonly used methods to measure the liquidity and... Read More Is the bottom line the best representation of a company's financial strength? A company's bottom line, also referred to as net income, is an important indicator of operational condition and... Read More Recently Added Definitions Extra-Contractual Obligations (ECO) Clause A clause in a reinsurance contract requiring a reinsurer to pay for expenses imposed upon the ceding insurer by regulatory... Read More Excess Judgment Loss The amount of additional loss that an insurer is required to pay above the policy limit. An excess judgment loss is... Read More Related Definitions Inventory Acid-Test Ratio Current Assets Asset Current Ratio Past Terms of the Day Black Monday Monetary Policy Indemnity Discount Bond Conglomerate You are currently subscribed as: mondemand.forex@blogger.com Unsubscribe | Manage Subscriptions Investopedia US, A Division of IAC. Copyright © 2015, Investopedia, LLC. All Rights Reserved Follow Us: