Quick Ratio Formula

Quick Ratio Formula

Quick ratio is liquidity status of the entity. Quick ratio believes that stock may take a long time for conversion in liquid form. Therefore stock is excluded from current asset. Quick ratio is calculated by the following formula

Quick Ratio =   Current Asset -Stock   .   

                         Current Liabilities

Example

Stock = 20,000

Debtor= 15,000

Cash = 20,000

Creditor= 30,000

Calculate Current Ration

Solution

Current asset

Stock = 20,000

Debtor= 15,000

Cash = 20,000

           55,000

Quick Ratio =   Current Asset-Stock   

                        Current Liabilities

=(55,000-20,000)/25,000

=35,000/30000

=166:1