Quick Ratio

A contractor's ability to pay current liabilities without having to convert non-cash assets to cash is measured by the quick ratio. The formula for computation is� (cash + receivables) / current liabilities. As a result, unlike the current ratio, the quick ratio excludes assets such as prepaids, inventories, and underbillings. Without selling goods, a contractor with a lower quick�ratio may not be able to meet their obligations. A high quick ratio indicates ineffective cash management.�

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