The higher the ratio result, the better a company’s liquidity and financial health; the lower the ratio, the more likely the company will struggle with paying debts. Madelyn Goodnight / Investopedia Formula for the Quick Ratio There are a few different ways to calculate the quick ratio. The...
The higher the ratio result, the better a company’s liquidity and financial health; the lower the ratio, the more likely the company will struggle with paying debts. Madelyn Goodnight / Investopedia Formula for the Quick Ratio There are a few different ways to calculate the quick ratio. The...
A strong current ratio greater than 1.0 indicates that a company has enough short-term assets on hand to liquidate to cover all short-term liabilities if necessary. However, a company may have much of these assets tied up in assets like inventory that may be difficult to move quickly ...
The formula for the quick ratio is: or Quick Ratio=CA−Inventory−PECurrent Liabilitieswhere:CA=current assetsPE=prepaid expenses\begin{aligned} &\text{Quick Ratio} = \frac { \text{CA} - \text{Inventory} - \text{PE} }{ \text{Current Liabilities} } \\ &\textbf{where:} \\ &\text...
The higher the ratio result, the better a company’s liquidity and financial health; the lower the ratio, the more likely the company will struggle with paying debts. Madelyn Goodnight / Investopedia Formula for the Quick Ratio There are a few different ways to calculate the quick ratio. The...