In finance, the quick ratio, also known as the acid-test ratio is a type of liquidity ratio, which measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick Ratio: The quick ratio is an indicator of a company’s short-term liquidity, and measures a company’s ability to meet its short-term obligations with its most liquid assets. Quick Ratio first quarter 2020 Comment: Due to increase in Current Liabilities in the first quarter 2020, Quick Ratio fell to 0.23 below Bank Of America Corporation average. Within Money Center Banks industry 27 other companies have achieved higher Quick Ratio than Bank Of America in first quarter 2020.
A company’s quick ratio can be calculated using its balance sheet. The quick ratio, a measure of liquidity of a business, is useful not only to the internal finance managers but equally useful to creditors, lenders, banks, investors etc. Quick ratio example. While total ranking remained unchanged compare to previous quarter at no. Quick Ratio Definition. The quick ratio is a liquidity ratio, like the current ratio and cash ratio, used for measuring a company’s short-term financial health by comparing its current assets to current liabilities. Quick ratio, also known as the acid test ratio measure the ability of the company to repay the short term debts with the help of the most liquid assets and it is calculated by adding total cash and equivalents, accounts receivable and the marketable investments of the company and then dividing it by its total current liabilities. Normally current ratio is widely used for bank finance but for businesses with liquidity crunch, banks may consider giving more importance to quick ratio. . It is a ratio developed to take care of the defects in Current Ratio. Use this business calculator to compute the quick or acid test ratio needed to run your business.