What is a normal quick ratio?
In respect to this, what is considered a good quick ratio?
A result of 1 is considered to be the normal quick ratio, as it indicates that the company is fully equipped with exactly enough assets to be instantly liquidated to pay off its current liabilities.
Similarly, what if quick ratio is less than 1? A company with a Quick Ratio of less than 1 cannot pay back its current liabilities. Quick Ratio = (Cash and cash equivalent + Marketable securities + Accounts receivable) / Current liabilities. Cash and cash equivalents are the most liquid assets found within the asset portion of a company's balance sheet.
Similarly one may ask, how do you interpret a quick ratio?
Interpreting the Quick Ratio A quick ratio that is greater than 1 means that the company has enough quick assets to pay for its current liabilities. Quick assets (cash and cash equivalents, marketable securities, and short-term receivables) are current assets that can be converted very easily into cash.
Is high quick ratio good or bad?
A quick ratio of 1 or above is considered good. When the ratio is at least 1, it means a company's quick assets are equal to its current liabilities. This means the company should not have trouble paying short-term debts. The higher the ratio, the better.