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| Current Assets: | £ |
| Less stock & prepayments: | (£) |
| Current liabilities: | £ |
| Your quick ratio is: | 0.0:1 |
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The quick assets ratio provides a more conservative measure than the working capital ratio in that it excludes stock (inventory). A ratio greater than 1:1 (i.e. 2:1) indicates that current liabilities can be met from current assets without having to liquidate stock.
Ratios should be considered over a period of time (say three years), in order to identify trends in the performance of the business.
The calculation used to obtain the ratio is:
Quick Assets Ratio = (Current Assets - Stock) / Current Liabilities
Comparing today's quick ratio to quick ratios calculated from previous financial statements can give you a hint of developing trends in your company. While changes in ratios don't automatically spell trouble, uncovering the reasons for changes can help you find ways to nip potential problems in the bud.
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