{"id":3188,"date":"2019-12-22T11:51:33","date_gmt":"2019-12-22T11:51:33","guid":{"rendered":"https:\/\/commerceiets.com\/?p=3188"},"modified":"2019-12-22T11:51:33","modified_gmt":"2019-12-22T11:51:33","slug":"quick-ratio-formula","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/quick-ratio-formula\/","title":{"rendered":"QUICK RATIO FORMULA"},"content":{"rendered":"\n<h1 class=\"has-text-align-center wp-block-heading\"><strong>QUICK RATIO FORMULA<\/strong><\/h1>\n\n\n\n<p>Quick Ratio, a type of liquidity ratio, may be defined as the relationship between quick or quick assets and current liabilities. An asset is said to be quick if can be converted into cash within a short period without loss of value. The quick ratio is also known as liquid ratio or acid test ratio. This ratio is the more rigorous test of liquidity that the current ratio. The quick ratio interpretation is made with reference to current assets excluding prepaid expenses and inventories i.e. quick assets and current liabilities. The quick ratio formula is as follows:<\/p>\n\n\n\n<p class=\"has-pale-cyan-blue-background-color has-background\"><strong>Quick Ratio= Quick Assets\/ Current Liabilities.<\/strong><\/p>\n\n\n\n<p><strong>EXAMPLE: <\/strong>Suppose the quick assets of a concern as Rs. 2,50,000 and current liabilities of the concern are Rs. 1,00,000. The current ratio will be calculated as follows:<\/p>\n\n\n\n<p><strong>Quick ratio= Quick Assets\/ Current Liabilities<\/strong><\/p>\n\n\n\n<p>Quick ratio= 2,50,000\/1,00,000<\/p>\n\n\n\n<p>Quick Ratio= 2.5:1.<\/p>\n\n\n\n<p><strong>QUICK ASSETS: <\/strong>Quick assets are the assets that can be easily converted into cash. These assets include the following assets:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Cash in hand<\/li><li>Cash at bank<\/li><li>Bills receivables<\/li><li>Sundry debtors<\/li><li>Marketable securities<\/li><li>Temporary investments<\/li><\/ul>\n\n\n\n<p>Assets not included in quick assets are:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Prepaid expenses<\/li><li>Inventories.<\/li><\/ul>\n\n\n\n<p>These can be calculated as:<\/p>\n\n\n\n<p><strong>Quick Assets= Current Assets- Prepaid expenses- Inventories<\/strong><\/p>\n\n\n\n<p><strong>CURRENT LIABILITIES: <\/strong>Current liabilities are the liabilities payable within 12 months from the date of balance sheet or within the period of operating cycle. Current liabilities include the following liabilities:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Short term borrowings<\/li><li>Trade payables i.e. creditors and bills payable<\/li><li>Short term provisions<\/li><li>Outstanding expenses<\/li><li>Incomes received in advance, etc.<\/li><\/ul>\n\n\n\n<p class=\"has-text-align-center\"><strong>INTERPRETATION<\/strong><\/p>\n\n\n\n<p>A high quick ratio is an indication that the firm is quick\nand has the ability to meet its current or quick liabilities. The high quick\nratio is bad when the firm is having slow-paying debtors.<\/p>\n\n\n\n<p>On the other hand, a low quick ratio represents that the\nfirm\u2019s liquidity position is not good. The low quick ratio may be considered\nsatisfactory if it has fast moving inventories.<\/p>\n\n\n\n<p class=\"has-text-align-center\"><strong>IDEAL RATIO<\/strong><\/p>\n\n\n\n<p>The ideal quick ratio is 1:1. It means the current assets\nshould be equal to the current liabilities only then the firm will be able to\nmeet its short term obligations. Although the quick ratio is more rigorous test\nof liquidity than current ratio, yet it should be used cautiously and rule 1:1\nshould not be used blindly. A quick ratio of 1:1 does not necessarily mean\nsatisfactory liquidity position if all the debtors cannot be realized and cash\nis needed immediately to meet the current obligations of the firm.<\/p>\n\n\n\n<p class=\"has-text-align-center\"><strong>SIGNIFICANCE OF QUICK RATIO<\/strong><\/p>\n\n\n\n<p>The quick ratio is very useful in measuring the liquidity\nposition of a firm. It measures the firm\u2019s capacity to pay off current\nobligations immediately and is a more rigorous test of liquidity than the\ncurrent ratio. It is used as a complementary ratio to the current ratio.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/accounting\/\"><strong>Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/non-profit-organisation\/\"><strong>Non profit organisation<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/depreciation\/\"><strong>Depreciation<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/liquidity-ratios-types\/\"><strong>Liquidity ratios<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/nature-of-accounting\/\"><strong>Nature of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/receipt-and-payment-account-pdf\/\"><strong>Receipts and Payments Account<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/depreciation-accounting\/\"><strong>Depreciation Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/acid-test-ratio-formula\/\"><strong>Acid Test Ratio<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/benefits-of-accounting\/\"><strong>Benefits of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/scope-of-accounting\/\"><strong>Scope of accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/hire-purchase-accounting-notes-pdf\/\"><strong>Hire Purchase Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cash-ratio\/\"><strong>Cash Ratio<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/difference-between-cost-accounting-and-financial-accounting\/\"><strong>Difference between cost accounting and financial accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-financial-accounting-management-accounting-and-cost-accounting\/\"><strong>Financial accounting, cost accounting and management accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-hire-purchase-and-instalment\/\"><strong>Difference between hire purchase and instalment system<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/financial-ratio-analysis\/\"><strong>Financial ratio analysis<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/difference-between-transaction-and-event\/\"><strong>Difference between transaction and event<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/transactions\/\"><strong>Transactions<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/users-of-accounting\/\"><strong>Users of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/current-ratio-formula\/\"><strong>Ratio analysis<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/limitations-of-accounting-2\/\"><strong>Limitation of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/capital-expenditure\/\"><strong>Capital Expenditure<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/instalment-system\/\"><strong>Instalment System<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-consignment-and-sale\/\"><strong>Difference between consignment and sale<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/book-keeping\/\"><strong>Book Keeping<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/revenue-expenditure\/\"><strong>Revenue Expenditure<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/reserves-accounting\/\"><strong>Reserves Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-normal-and-abnormal-loss\/\"><strong>Abnormal loss vs normal loss in consignment<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/accountancy\/\"><strong>Accountancy<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-capital-expenditure-and-revenue-expenditure\/\"><strong>Difference between capital and revenue expenditure<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/reserves-accounting\/\"><strong>Provisions&nbsp;<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/treatment-of-loss-on-consignment\/\"><strong>Treatment of loss on consignment<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/accounting-is-an-art-or-science\/\"><strong>Accounting as science or an art<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/accounting-equation\/\"><strong>Accounting Equation<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/single-entry-system-in-accounting\/\"><strong>Single entry system<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/accounting-treatment-of-consignment\/\"><strong>Accounting treatment of consignment<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/accounting-is-an-art-or-science\/\"><strong>Book Keeping vs accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/deferred-revenue-expenditure\/\"><strong>Deferred Revenue Expenditure<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/statement-of-affairs-and-balance-sheet-difference\/\"><strong>Difference between statement of affairs and balance sheet<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-joint-venture-and-consignment\/\"><strong>Joint venture vs consignment<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/accounting-is-an-art-or-science\/\"><strong>Book keeping vs accountancy<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/capital-receipt\/\"><strong>Capital receipt<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/ifrs\/\"><strong>IFRS<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/departmental-accounting\/\"><strong>Departmental Accounting<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/accounting-is-an-art-or-science\/\"><strong>Accounting vs accountancy<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/revenue-receipt\/\"><strong>Revenue receipt<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/balance-sheet\/\"><strong>Balance Sheet<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/methods-of-departmental-accounting\/\"><strong>Methods of departmental accounting<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/basis-of-accounting\/\"><strong>Basis of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-capital-and-revenue-receipt\/\"><strong>Difference between capital and revenue receipt<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/profit-and-loss-account\/\"><strong>Profit and loss Account<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/allocation-of-expenses-in-departmental-accounting\/\"><strong>Allocation of expenses in departmental accounting<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/branches-of-accounting\/\"><strong>Branches of accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-accounting-concepts-and-conventions\/\"><strong>Difference between accounting concepts and conventions<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/trading-account\/\"><strong>Trading Account<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/inter-departmental-transfers\/\"><strong>Inter-departmental transfers<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/cash-and-mercantile-system-of-accounting\/\"><strong>Cash and mercantile system of accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/accounting-standards\/\"><strong>Accounting Standards<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/voyage-account\/\"><strong>Voyage Account<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/different-types-of-branches\/\"><strong>Different types of branches<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/accounting-principles\/\"><strong>Accounting Principles<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/objectives-of-accounting\/\"><strong>Objectives of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/accounting-for-incomplete-voyage\/\"><strong>Accounting for Incomplete Voyage<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-departmental-and-branch-accounting\/\"><strong>Departmental vs Branch accounting<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/golden-rules-of-accounting\/\"><strong>Golden ru\nles of accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/process-of-accounting\/\"><strong>Process of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/joint-venture\/\"><strong>Joint venture<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/methods-of-branch-accounting\/\"><strong>Methods of branch accounting<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/double-entry-system-of-accounting\/\"><strong>Double entry system of book keeping<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/scope-of-accounting\/\"><strong>Scope of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-joint-venture-and-partnership\/\"><strong>Joint Venture Vs Partnership<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/incorporation-of-branch-trial-balance\/\"><strong>Incorporation of branch trial balance<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/difference-between-double-single-entry-system\/\"><strong>Double entry vs Single entry system<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-accounting-concepts-and-conventions\/\"><strong>Accounting Concepts vs Accounting conventions<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/methods-of-recording-transactions-in-joint-venture\/\"><strong>Methods of recording transactions in Joint Venture<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/garner-vs-murray-rule\/\"><strong>Garner VS Murray Rule<\/strong><\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/history-of-accounting-pdf\/\"><strong>History of Accounting<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-provisions-and-reserves\/\"><strong>Difference between provisions and reserves<\/strong><\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/consignment\/\"><strong>Consignment<\/strong><\/a><\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noreferrer noopener\">CONNECT ON LINKEDIN<\/a><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>QUICK RATIO FORMULA Quick Ratio, a type of liquidity ratio, may be defined as the relationship between quick or quick assets and current liabilities. An asset is said to be quick if can be converted into cash within a short period without loss of value. The quick ratio is also known as liquid ratio or&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/quick-ratio-formula\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;QUICK RATIO FORMULA&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":3189,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,11],"tags":[],"class_list":["post-3188","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-12-accountancy","category-financial-accounting"],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3188","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=3188"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3188\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/3189"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=3188"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=3188"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=3188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}