Quick Ratio Definition - Formula - Importance - Example - Analysis
Quick Ration Definition What is Quick Ratio? Basically, Quick Ratio shows how effectively a company can meet its short-term obligations ( Current Liabilitie s ). How effectively a company is in the Liquidity of its Current Assets . so this ratio is also called Liquidity Ratio. Also, Acid-Test Ratio and Working Capital Ratio are the other names of this ratio. This ratio represents better presence of those Current Assets that are converted into cash very quickly, so we deduct those assets from Current Assets that has less liquidity in nature. Here Liquidity means those assets that converted into cash very quickly so we deduct Closing Inventory and Prepaid Expenses From Current Assets in order to arrive More Liquid Current Assets or Quick Assets. Acid-Test Ratio includes Quick Assets that are Cash And Cash Equivalents (Marketable Securities, etc ) and Accounts Receivable . Investors and Accounts Payable are in...