# Quick Assets

## What it is:

Quick assets are assets that can be converted to cash quickly. Typically, they include cash, accounts receivable, marketable securities, and sometimes (not usually) inventory.

## How it works (Example):

For example, let's say that Company XYZ has \$60,000 in cash, \$40,000 in receivables, and \$10,000 in marketable securities. We would say that Company XYZ has \$110,000 in quick assets.

## Why it Matters:

Quick assets are a key part of the quick ratio, which is a measure of whether and how well a company can pay its short-term financial liabilities. The ratio is often called the acid-test ratio. The primary formula for quick ratio is:

(Cash + Marketable Securities + Accounts Receivable)/Current Liabilities

For example, here is some information about XYZ Company:

Using the primary quick ratio formula and the information above, we can calculate that XYZ Company’s quick ratio is:

(\$60,000 + \$10,000 + \$40,000)/\$65,000  = 1.692

This means that for every dollar of XYZ Company’s current liabilities, XYZ Company had \$1.69 of very liquid assets to pay those liabilities.

A common rule of thumb is that a quick ratio of 1-to-1 or greater means a company can pay its current liabilities.

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