Ratio used to determine the degree of liquidity of a company. Unless otherwise stated, it is calculated from the ratio of cash plus receivables plus securities to current liabilities (indicator to measure a company’s ability to pay its liabilities, using assets that are cash or very liquid. Computed by subtracting current assets by inventory, then dividing by current liabilities. A ratio of 1.0 or greater may be recommended, but an acceptable value will largely depend on the industry a company belongs to). – In each case, a very precise examination of the individual items is necessary in order to be able to draw truly accurate conclusions from the quick ratio. In particular, the collectibility of the reported receivables and the actual value (the market price which could be attained if the asset is offered for sale at a particular time) of securities – including “safe” government bonds – must be carefully calculated. – See acid ratio, liquidation, liquidity, debtor liquidity ratio, first-degree liquidity, liquidity ratio, liquidity forms.
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