What is the quick ratio? What does the quick ratio mean as a key performance indicator for your company?
The quick ratio is a measure that indicates whether your company is currently able to pay its accounts payable.
The ratio expresses the number of times immediately available liquid assets divided by the debts payable immediately. Unlike the current ratio, the value of existing inventory is not included in the quick ratio. However, the value of outstanding receivables is taken into account. After all, your receivables can be pledged to a bank or factoring company in an emergency.
If the quick ratio is lower than 1, you are facing a short-term liquidity problem. You must take measures. The situation is not necessarily hopeless. Your company may possibly possess valuable assets that can be sold. If so, a bank sometimes provides a bridging loan.
