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due for immediate payment, the quick ratio may look healthy when the business is actually about to run out of cash. In contrast, if a business has fast payment from customers, but long terms from suppliers, it may have a low quick ratio and yet be very healthy.
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173:{\displaystyle {\text{Quick Assets}}={\text{Cash and Cash Equivalents}}+{\text{Marketable Securities}}+{\text{Accounts Receivable}}={\text{Current Assets}}-{\text{Inventory}}-{\text{Prepaid Expenses}}}
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Although the quick ratio is a test for the financial viability of a business, it does not give a complete picture of the business's health. For example, if a business has large amounts in
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Generally, the acid test ratio should be 1:1 or higher for a healthy company. However, this varies widely by industry. In general, the higher the ratio, the greater the company's
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A normal liquid ratio is considered to be 1:1. A company with a quick ratio of less than 1 cannot currently fully pay back its current liabilities.
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97:{\displaystyle {\text{Quick Ratio}}={\frac {\text{Quick Assets}}{\text{Current Liabilities}}}}
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How to Read a
Financial Report: Wringing Vital Signs Out of the Numbers
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due for payment after a long period, while also having larger
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A company's liquid assets divided by its current liabilities
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107:Where quick assets can be defined as follows:
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35:that measures the ability of a company to use
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271:Gallagher, Timothy (2003).
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127:Cash and Cash Equivalents
234:Financial ratio analysis
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220:References
163:−
159:Inventory
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59:inventory
305:Category
203:See also
65:Formula
31:, is a
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23:, the
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45:ratio
285:ISBN
252:ISBN
19:In
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