Your Short Term Debt Level Is Becoming Unmanageable Or Changing
Your Short Term Asset Levels Are Changing
Your Sales Levels Are Changing
What Is Quick Liquidity Ratio?
What Does It Mean?
How Is It Calculated?
How Can I Improve My Quick Liquidity Ratio?
How do you get your Quick Ratio? The Quick Ratio overcomes some of the issues with the Liquidity Ratio measure and only assesses those assets which have the potential to be liquidated quickly. This ratio does not include inventories as sales of inventory rarely achieve the value that may be on the books. A figure above 1 again is considered to be acceptable. However, the higher the value, the better.
The ratio indicates how immediately liquid your business is excluding less liquid assets such as stock. For instance, if all of your creditors demanded payment at the same time, how much could realistically be raised immediately to pay them? Would this cover your liabilities? Check your liquidity with Jazoodle now.
Your company’s liquidity is calculated by comparing your total current assets (excluding stock / inventory) to total current liabilities. A current asset or liability is one that is expected to become due within the next 12 months.
Your ratio can be improved by a number of measures or changes, including:
Increasing cash balances.
Increase sales revenues
Reduce short term debt
Pay off credit cards
Implement a strong creditor and debtor payment policy