Quick ratio: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Add link to Balance sheet ratio page.) |
imported>Doug Williamson m (Update links.) |
||
| Line 20: | Line 20: | ||
== See also == | == See also == | ||
* [[Balance sheet ratio]] | * [[Balance sheet ratio]] | ||
* [[Current assets]] | |||
* [[Current liabilities]] | |||
* [[Current ratio]] | * [[Current ratio]] | ||
* [[Inventory]] | |||
* [[Liquidity]] | * [[Liquidity]] | ||
* [[Stock]] | |||
[[Category:Liquidity_management]] | [[Category:Liquidity_management]] | ||
Revision as of 14:09, 21 August 2018
(Current assets less Inventories) / 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 inventories).
Example
Current assets (excluding inventories) = £3m.
Current liabilities = £4m.
The Quick ratio is:
= 3 / 4
= 0.75.
The quick ratio is also known as the Acid test or the Acid test ratio.
Inventories are sometimes also known as Stock.
