Quick ratio and Scarce resource: Difference between pages

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''Financial ratio analysis - liquidity ratios.''
''Economics - microeconomics''. 


(Current assets <i>less</i> Inventories) / Current liabilities.
An input to a process that is in limited supply.


The quick ratio gives a very rough indication of the liquidity (or solvency) of the reporting entity.<br />
For example, appropriately skilled labour, or particular raw materials.
If the quick ratio were to fall below 1.0, this would indicate that the entity would not be able to meet its current liabilities out of its cash in hand and the proceeds of its other current assets (excluding inventories).
 
 
<b>Example</b><br />
Current assets (excluding inventories) = £3m. <br />
Current liabilities = £4m. <br />
 
The Quick ratio is: <br />
= 3 / 4 <br />
= 0.75.
 
 
The quick ratio is also known as the Acid test or the Acid test ratio.<br />
Inventories are sometimes also known as Stock.




== See also ==
== See also ==
* [[Balance sheet ratio]]
* [[Limiting factor]]
* [[Current assets]]
* [[Microeconomics]]
* [[Current liabilities]]
* [[Production possibility curves]]
* [[Current ratio]]
* [[Scarce resource analysis]]
* [[Inventory]]
* [[Scarcity]]
* [[Liquidity]]
* [[Liquidity ratio]]
* [[Stock]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_management]]
[[Category:Knowledge_and_information_management]]
[[Category:Planning_and_projects]]
[[Category:The_business_context]]
[[Category:The_business_context]]
[[Category:Liquidity_management]]
[[Category:Corporate_finance]]
[[Category:Investment]]

Revision as of 14:33, 18 November 2020

Economics - microeconomics.

An input to a process that is in limited supply.

For example, appropriately skilled labour, or particular raw materials.


See also

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