Wednesday 2 January 2019

Quick ratio Formula

A quick ratio is calculating by adding cash, cash equivalents, short-term investments, and current receivables together then dividing them by current liabilities. Sometimes company financial statements don't give a breakdown of quick assets on the balance sheet.

The ratio of fast or in English United Kingdom often refer to with the Quick Ratio is a ratio use to measure a company's ability to meet the obligations of the term in a nutshell by using the most liquid assets or assets that most approaches the cash (quick assets). That include as Assets fast (Quick Assets) is current assets or assets smoothly which can be quickly convert into cash and approaching the value of her book.

The quick ratio is usually regards as a sign of strength or weakness of financial companies. With the Quick Ratio Quick Ratio or this, the lender can determine how much of the short-term debt companies that can be met by selling all the company's liquid assets in the shortest time. Quick ratio or Quick Ratio is often refer to with the Acid Test Ratio.

Formula Quick Ratio (Quick Ratio)

Quick Ratio Quick Ratio or calculate by subtracting inventories (inventory) of current assets (current assets) and the rest divide by current liabilities (Current Liabilities). Reduce inventory or Inventory of the calculation of current assets is primarily due to inventory the assets difficult smoothly convert with cash in a short time and usually will also incur losses in the event of liquidation.

The following is the formula of the ratio of fast (Quick Ratio):

Quick ratio = (current assets – inventory)/current liabilities


  • Current assets or assets are assets which can be smoothly convert into cash

  • Debt is a debt the company smoothly to be paid in cash within one year or in the operating cycle of the company.

  • Inventories (Inventory) are assets which include finish goods which can be sold in a given period or goods that are still in the process of production or manufacture of the raw materials is still waiting for its use in a production process.

Case Quick Ratio Calculations (Quick Ratio)

XYZ company has current assets of $ 100 million, in current assets is the preparation of raw materials and finish goods by as much as $ 20 million. While the debt amount $ 70 million. What is the Quick Ratio Quick Ratio or him?


Current assets = $ 100 million,-
Inventory = $ 20 million,-
Debt Smoothly = $ 70 million,-
Quick Ratio =?


(1) Quick ratio = (current assets – inventory)/current liabilities
(2) Quick Ratio = ($ 100 million, – – $ 20 million,-)/USD 70 million,-
(3) Quick Ratio = $ 80 million,-/USD 70 million,-
(4) Quick Ratio = 1.14 times

Quick Ratio Quick Ratio or on the company XYZ is 1.14 times.

Assessment of the Quick Ratio (Quick Ratio)

The higher the Quick Ratio Quick Ratio or a company, the better financial position of the company. An acceptable Quick ratio generally is 1 time. But can vary from one industry with other industries. The company's current ratio less than 1 indicates the company concern cannot pay liabilities amount in a short time. It is the signs are not good for the creditors, business partners and investors.

No comments:

Post a Comment