Calculation of fast rate

May 25, 2018 | By admin4u | Filed in: Uncategorized.

Liquidity rates are used to measure the entity's ability to meet its short-term financial liabilities, ie the liquidity of a company. From a secular point of view, this is a ready-made cash or asset that can easily make cash. Short term refers to a period of 12 months or less. Two of the most important liquidity ratios are the current rate and the rapid rate. This latter definition has a stricter liquidity ratio as it excludes all items from current assets and short-term liabilities to the lowest illiquidity.

Mandatory Resources:

– The Company's Balance Sheet Study

– Notes to the Financial Statements, if applicable

Calculation steps:

1. Observe the full turnarounds in the balance sheet. Depending on the disclosure on the billers page, you may need to look at the breakdown of forgers

. Limited Money . It deducts "limited cash" from all current assets. Such cash is not available for immediate use due to certain legal or other charges.

3rd Stocks . Dedicated to "stocks". Accumulated merchandise can only be liquefied at sales. Therefore, they may not be easily implemented when and when needed.

4th Forward Costs . Extractive payments should be subtracted. Although the assets of prepayments, as they refer to certain predetermined future outflows, may not be converted into cash if necessary. It is extremely rare that advance payments for business expenses were repaid by third parties

. You are coming to "quick tools" that typically contain cash, cash equivalents (tradable securities) and receivables / debtors

. Consider Total Liabilities and Their Disintegration

7. Bank Loan . Drain the overdraft amount from the full liability. Overdrafts are drawn between lines of credit generally covering periods of more than one year and which are often renewed at maturity. More or less, these assets become a permanent source of funding. It is common practice that overdrafts can not be claimed and provide additional constancy.

8th You get quick commitments that typically include receivables / creditors, long-term debt, payroll tax, and various types of accrued expenses

. Use the formula for the final calculation to reach the ratio:

Quick Ratio = Quick Assets / Quick Liabilities

Source by Swati Sinha

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