The quick ratio **is an indicator of a company’s short-term liquidity position and measures a company’s ability to meet its short-term obligations with its most liquid assets**. The quick ratio is considered a more conservative measure than the ** current ratio**, which includes all current assets as coverage for current liabilities.

The quick ratio **measures the dollar amount of liquid assets available against the dollar amount of current liabilities of a company. Liquid assets** are those current assets that can be quickly converted into cash with minimal impact on the price received in the open market, while **current liabilities** are a company's debts or obligations that are due to be paid to creditors within one year.

A **result of 1 **is considered to be the normal quick ratio. It indicates that the company is fully equipped with exactly enough assets to be instantly liquidated to pay off its current liabilities. A company that has a quick ratio of **less than 1** may not be able to fully pay off its current liabilities in the short term, while a company having a quick ratio **higher than 1** can instantly get rid of its current liabilities. For instance, a quick ratio of 1.5 indicates that a company has $1.50 of liquid assets available to cover each $1 of its current liabilities.

**Quick Ratio Formula**

There's a few different ways to calculate the quick ratio.** The most common approach is to add the most liquid assets and divide the total by current liabilities**:

**Quick Ratio = “Quick Assets” / Current Liabilities**

Quick assets are defined as the most liquid current assets that can easily be exchanged for cash. For most companies, quick assets are limited to just a few types of assets:

**Quick Assets** = Cash + CE + MS + NAR

where:

**CE** = Cash equivalents

**MS** = Marketable securities

**NAR** = Net accounts receivable

Source: Investopedia, Quick Ratio Formula With Examples, Pros and Cons, accessed 25 April 2024, <https://www.investopedia.com/terms/q/quickratio.asp>

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