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In finance, the quick ratio, also known as the acid-test ratio, is a liquidity ratio that measures the ability of a company to use near-cash assets (or 'quick' assets) to extinguish or retire current liabilities immediately. It is the ratio between quick assets and current liabilities. A normal liquid ratio is considered to be 1:1.
A quick ratio tests a company’s current liquidity and solvency. It is a measure of whether the company can pay its short-term obligations with its cash or cash-like assets on hand. (Short term ...
Quick ratio (also known as an acid test) or current ratio, accounting ratios used to determine the liquidity of a business entity; In accounting, the liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash. It is the result of dividing the total cash by short-term borrowings. It shows the number of ...
For a corporation with a published balance sheet there are various ratios used to calculate a measure of liquidity. [1] These include the following: [2] The current ratio is the simplest measure and calculated by dividing the total current assets by the total current liabilities. A value of over 100% is normal in a non-banking corporation.
You’ll find the current ratio with other liquidity ratios. General Electric’s (GE) current assets in December 2021 were $65.5 billion; its current liabilities were $51.95 billion, making its ...
Quick ratio is liquidity indicator that defines current ratio by measuring the most liquid current assets in the company that are available to cover liabilities. Unlike to the current ratio, inventories and other assets that are difficult to convert into the cash are excluded from the calculation of quick ratio. [22] [23]
Liquidity ratios measure the availability of cash to pay debt. [3] Efficiency (activity) ratios measure how quickly a firm converts non-cash assets to cash assets. [4] Debt ratios measure the firm's ability to repay long-term debt. [5] Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. [6]
As pointed out by research from the University of Chicago, the liquidity mismatch caused between loans and deposits may be addressed by deposit insurance, such as that provided by the FDIC. [3] Duration mismatch is an indication of a firm with liquidity problems, and it may be measured using the quick ratio, acid test, or similar accounting ...