Quick Assets Key takeaways
* Quick assets are the most liquid assets a company holds and can be converted to cash quickly with little loss of value.
* They typically include cash and cash equivalents, marketable securities, and accounts receivable.
* Quick assets exclude inventory and other less liquid current assets, making them a more conservative liquidity measure than total current assets.
* The quick ratio (acid-test) uses quick assets to evaluate a company’s ability to meet short-term obligations without selling inventory.
What are quick assets? Quick assets are cash or assets that can be converted into cash rapidly and without significant loss of value. Companies keep quick assets to meet immediate operating, investing, or financing needs. Common components:
Cash and cash equivalents
Marketable securities
* Accounts receivable Inventories and prepaid expenses are excluded because they typically take longer to convert into cash or may require discounts to sell quickly. Explore More Resources
Why quick assets matter Quick assets provide a conservative snapshot of liquidity. They show whether a company can cover short-term liabilities if revenue or collections slow. Firms with low cash may rely on lines of credit or other financing to fill gaps. The composition of quick assets also varies by industry—for example, B2B companies often have larger accounts receivable balances than retail firms that sell directly to consumers. The quick ratio (acid-test) The quick ratio measures immediate liquidity: Explore More Resources
Quick Ratio = (Cash & Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities An equivalent formulation: Explore More Resources
Quick Ratio = (Current Assets − Inventory − Prepaid Expenses) / Current Liabilities A higher quick ratio indicates a stronger ability to meet short-term obligations without needing to sell inventory. Explore More Resources
Quick assets vs. current assets Current assets include all assets expected to be converted into cash within a year (cash, marketable securities, accounts receivable, inventory, prepaid expenses). Quick assets are a subset of current assets that exclude inventory and other less liquid items, offering a stricter test of short-term financial strength. Conclusion Quick assets and the quick ratio are useful tools for assessing a company’s immediate liquidity. Because they focus on highly liquid items and exclude inventory, they provide a conservative view of a firm’s capacity to meet near-term obligations. Explore More Resources