QR -Quick Ratio is expressed as the ratio of current assets and current liabilities.
QR = (Current Assets - Inventories) / Current Liabilities
This ratio reflects the structure of current assets in terms of liquidity. Current assets excluding inventories are also referred to as the swift current assets.
For companies whose business is providing services exclusively, the quick ratio is close to the current ratio. For manufacturing companies, both ratios can vary significantly.
The indicated optimum is between 1 to 1.5. A higher value is favorable in terms of creditors, but for the management of the enterprise it is a signal of small profitability (too much of current assets is bound in the form of cash, which brings little or no interest). It is therefore necessary to determine the optimal structure of the prompt current assets. This optimization is concerned with management of inventory, receivables and cash.
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