DO YOU KNOW WHAT THE QUICK RATIO OF YOUR BUSINESS IS?

acidtestYour company’s quick ratio, or acid ratio, measures its immediate debt-paying ability.  It is calculated as follows:

Quick Assets (cash, receivables and marketable securities)  divided by Current Liabilities

Why is it important? If your company’s quick ratio is $1.50 to $2.00 in current assets for every $1.00 in current liabilities, you may be scrambling for cash. If your quick ratio is over $2.00 in current assets for every $1.00 in current liabilities, then your company has the ability to pay its short-term debt. Accelerating collections in receivables in the easiest way to raise your cash balance and free up cash for reinvesting in the business.  We can provide information to you to help increase collections without damaging the relationship with the customer. Contact us today.

As a CPA/small business advisory firm, we mentor small business owners to empower them with the knowledge and skills to run a successful business. Allow us to evaluate your small business needs today. Give us a call at (727) 391-7373 or contact us at http://www.LStortzCPA.com

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