Quick Ratio
CONDITION
| Year : | 2006 |
| Your ratio : | 0.57 |
| Industry Avg : | 0.47 |
| Inventories : | $26,729 |
| Total Current Liabilities: | $102,096 |
| Current Assets : | $84,543 |
GRAPH
Quick Ratio
The Quick Ratio is much more exacting measure than the Current Ratio, By excluding inventories, it cobncentrates on the truly liquid assets, with a calculated value that is fairly certain. Quick helps answer the question: "if all sales revenues should disapper, could m business meet its current obligations with the readily convertable'quick' funds on hand?" Community business duistruptions due to unforeseen event, like storms, flood,highway construction or a causalty loss can quickly bring sales to a minimum or stop.Industries with very high inventory turnover will typically have a Quick ratio less than 1.0.This is also a good ratio to apply when establishing customer credit, to make sure that they can meet their financial payments- your receivables. If their ratio is below 1.0,you may require them to have business interruption insuarance.
Commonly referred to as the "Acid Test". Like the current ratio,the Quick ratio measures a business' liquidity. However, many financial planners consider it a tougher measure than the current ratio because it excludes inventories when counting assets. It calculates a business's liquid assets in relation to its liabilities. The higher the ratio is, the higher your business' level of liquidity, which usually corresponds to its financial health. The optimal Quick ratio is 1 or higher. Generally any value less than 1 indicates a reciprocal "dependancy" on inventory or other current assets to liquidate short-term debt.
The Quick Ratio is a much more exacting measure than the Current Ratio. By excluding inventories, it concentrates on the really liquid assets,with value that is fairly certain. It helps answer the question:"if all sales revenues should disapper, could my business meet its current obligations with the readily convertible 'quick' funds on hand?" Irrespective of peer data,a ratio of 1.0 is preferred.