What assets are considered in the Quick Ratio? Cash Inventory Accounts Receivables.
According to the data of the image, relates acid test: Firm A Firm B.
According to the image data, the acid test should be: 9.11 1.91 0.91 1.09.
What is another name for the Quick Ratio? The Acid Test Return on Assets Asset ratio.
What is the formula for the Quick Ratio? Current Assets Minus Inventory ÷ Total Current Liabilities. Total Current Assets ÷ Total Current Liabilities. Total Liabilities ÷ Net Worth. Total Current Assets minus Total Current Liabilities.
So what is quick ratio? Quick ratio indicates companies ability to cover its short term liabilities. Quick ratio is commonly used to indicate potential liquidity of the company, which is a posible lack of cash.
The commonly acceptable quick ratio is: 2 1 0.
Indicates whether a company has enough current assets to cover immediate liabilities without selling inventory: Accounts Receivable Turnover Acid Test Ratio = Quick Ratio Debt to Equity Ratio Current Ratio.
The quick ratio is an indicator of : Liquidity ratio Profitability ratios Efficiency ratios.
Calculate quick ratio of PQR Limited. 1.03 3.01 0.13.
Check everything right: Quick ratio is considered a more reliable test of short-term solvency than current ratio because it shows the ability of the business to pay short term debts immediately. Inventories and prepaid expenses are excluded from current assets for the purpose of computing quick ratio because inventories may take long period of time to be converted into cash and prepaid expenses cannot be used to pay current liabilities. Generally, a quick ratio of 1:1 is considered satisfactory. Like current ratio, this ratio should also be interpreted carefully. Having a quick ratio of 1:1 or higher does not mean that the company has a strong liquidity position because a company may have high quick ratio but slow paying debtors.
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