For example, if current assets equal $15,000,000, current inventory equals $6,000,000, and current liabilities equal $3,000,000, then quick ratio amounts to: ($15,000,000 - $6,000,000)/$3,000,000 = 3. Since we subtracted current inventory, it means that for every dollar of current liabilities there are three dollars of easily convertible assets. In general, a quick ratioof 1 or more is accepted by most creditors; however, quick ratios vary greatly from industry to industry.
Use quick ratio in a sentence
“ I took a quick ratio to see if we had the ability to meet our obligations and I was right in doing so. ”
“ You should try and find a good quick ratio that will let you get your hands on your cash when you need it. ”
“ If you want to figure out the best way to proceed for the future you first will need to figure out the quick ratio. ”