What are Quick Assets?

Quick assets are defined as assets that can quickly be converted to cash. Most typically, quick assets include: cash, accounts receivable, marketable securities, and sometimes (not usually) inventory.

Quick Assets Example

Let's say that Company XYZ has $60,000 in cash, $40,000 in receivables, and $10,000 in marketable securities. In this example of quick assets, we would say that Company XYZ has $110,000 in quick assets.

Why Are Quick Assets Important?

Quick assets are a key part of the quick ratio, a measure of whether – and how well – a company can pay its short-term financial liabilities. Quick ratio is also referred to as the acid-test ratio.

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

Quick Ratio Formula

The most common formula for quick ratio is as follows:

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

Quick Ratio Formula Example
Quick Assets

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.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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