Definition
The financial accounting term quick asset is used to describe a subset of current assets used in the calculation of the quick ratio, also known as the acid test. Quick assets include those assets that can reasonably be used to pay current liabilities. This includes cash, marketable securities, and accounts receivable.
Calculation
Quick Assets = Cash + Marketable Securities + Accounts Receivable
Alternatively:
Quick Assets = Current Assets - Inventories - Prepaid Expenses
Explanation
Quick assets are used in the calculation of the quick ratio, which is a measure of a company's ability to convert assets into cash. The quick ratio is used by analysts and investors to evaluate how well a company is able to meet short term debt obligations using cash.
Quick assets consist of:
Cash: includes paper money, coins, checks, money orders, and money on deposit with banks.
Marketable Securities: common or preferred stock investments held by a company in another large corporation.
Accounts Receivable: goods or services received but not yet paid for by a customer.
Example
Company A's balance sheet indicates cash and cash equivalents of $2,219,000, short-term investments of $1,416,000, and net receivables of $3,867,000. The quick assets for Company A would be:
= $2,219,000 + $1,416,000 + $3,867,000, or $7,502,000
Related Terms
balance sheet, cash, marketable securities, accounts receivable, acid test, prepaid expense
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