Search results
Results from the WOW.Com Content Network
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.
The quick ratio is calculated by deducting inventories and prepayments from current assets and then dividing by current liabilities, giving a measure of the ability to meet current liabilities from assets that can be readily sold. A better way for a trading corporation to meet liabilities is from cash flows, rather than through asset sales, so;
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.
A current ratio lower than the industry average could mean the company is at risk for default, and in general, is a riskier investment. ... Current ratio vs. quick ratio vs. debt-to-equity.
A financial ratio or accounting ratio states the relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting , there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization.
Financial ratios are very powerful tools to perform some quick analysis of financial statements. There are four main categories of ratios: liquidity ratios, profitability ratios, activity ratios and leverage ratios. These are typically analyzed over time and across competitors in an industry.
Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently." [2] Financial statements may be used by users for different purposes: