5 Most Important Financial Ratios to Analyze a Company

4. Quick Ratio

Number of Mentions: 4

To address the negative impact of including the inventory in the current ratio, the quick ratio is measured by dividing the current assets minus the inventory by the current liabilities. The quick ratio is a more stringent measure of a company’s liquidity as it includes only the most liquid assets. A quick ratio above 1 is a great sign of a company’s liquidity, ability to meet day-to-day expenses, and cash flow performance.