Quick Ratio

Posted in Finance, Accounting and Economics Terms, Total Reads: 728
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Definition: Quick Ratio

Quick ratio is a type of liquidity ratio. It is a stringent measure of liquidity. It indicates a company’s ability to satisfy its current liabilities with its most liquid assets or Quick assets which include cash, short term marketable instruments and account receivables.

Example:

Given below is excerpt of Maruti Suzuki’s 2011 balance sheet

 

      Inventories

1438.4

      Sundry Debtors

950.2

      Cash and Bank

2528.1

      Short term inv

1573.7

      Total Current Assets

6490.4

      Current Liabilities

3646.6

 

Quick Assets of Maruti  = Cash and Bank + Sundry Debtors(Account Receivables) + short term investment

                                                = 2528.1 + 950.2 + 1573.7

                                                = 5052

Quick Ratio         =             Quick Assets/Current Liabilities

                                =             5052/3646.6

                                =             1.3854

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