Quick ratio: Difference between revisions
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The quick ratio gives a very rough indication of the liquidity (or solvency) of the reporting entity. | The quick ratio gives a very rough indication of the liquidity (or solvency) of the reporting entity. | ||
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 stock). | 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 stock). | ||
For example, if current assets (excluding stock) are £3m and current liabilities are £4m, the Quick ratio = 3/4 = 0.75. | |||
Also known as the Acid test or the Acid test ratio. | Also known as the Acid test or the Acid test ratio. | ||
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* [[Current ratio]] | * [[Current ratio]] | ||
* [[Liquidity]] | * [[Liquidity]] | ||
Revision as of 15:59, 28 March 2013
[Current assets less Stock] ÷ Current liabilities.
The quick ratio gives a very rough indication of the liquidity (or solvency) of the reporting entity.
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 stock).
For example, if current assets (excluding stock) are £3m and current liabilities are £4m, the Quick ratio = 3/4 = 0.75.
Also known as the Acid test or the Acid test ratio.
