Quick Assets

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What are 'Quick Assets'

Anything having commercial or exchange value that can easily be converted into cash, or that is already in cash form. Quick assets are the highly liquid assets held by a company, including cash, marketable securities and accounts receivable. Quick assets are often calculated as current assets (cash + marketable securities + accounts receivable) minus inventories (since inventories are often a firm's least-liquid current assets). Quick assets are used by companies to calculate certain financial ratios that are used in decision making, including the quick ratio.

BREAKING DOWN 'Quick Assets'

The quick ratio (sometimes called the quick asset ratio or "acid test") is a financial ratio that divides a company's cash + marketable securities + accounts receivable by its current liabilities.

By keeping inventories out of the equation, the quick ratio allows the company to focus on its quick assets – those that could be quickly converted to cash – and helps the company determine if it could meet its financial obligations if sales (and revenues) were to cease.

The current ratio, on the other hand, is equal to current assets (including inventories and any assets that could be converted into cash within a "normal" 12-month operating period) divided by current liabilities.

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RELATED FAQS
  1. What is the formula for calculating the quick ratio in Excel?

    Understand the basics of the quick ratio, including how it is used as a measure of a company's liquidity and how to calculate ... Read Answer >>
  2. When are current assets converted to liquid assets?

    Understand the meaning of the accounting term ''current assets,'' and learn when and how current assets are converted into ... Read Answer >>
  3. What are some alternative liquidity ratios to the cash ratio?

    Learn what the cash ratio measures, and understand what two other liquidity ratios can be used by a company to replace the ... Read Answer >>
  4. What are the main differences between the current ratio and the quick ratio?

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  5. How do you calculate the quick ratio?

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