Formula of Quick Ratio

Quick ratio is used by various analysts to see the liquidity position of the company because any company would be facing trouble if it has not enough liquidity and that is why analysis of this is important.

Quick ratio formula

(Current Assets – Inventory and Prepaid Expense)/Current Liabilities

 Ideally the quick ratio of a company should be 1:1; however it may vary for companies which are operating in an industry which has high gestation period and also those sectors which has lower liquidity requirements.

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