Quick Assets refer to cash or other assets that a business can quickly and easily liquidate to cover its short-term liabilities. These assets include items such as cash, marketable securities, and accounts receivable, excluding inventory or other non-liquid current assets. Quick assets are a key component in evaluating the financial health of a company because they indicate its ability to satisfy immediate obligations without needing to sell long-term assets or secure additional financing.
For example, if a company has $100,000 in cash, $50,000 in accounts receivables, and $30,000 in marketable securities, its quick assets would total $180,000. These provide a cushion of liquidity that helps the business maintain operations when unexpected short-term debts or expenses arise. However, liabilities, such as accounts payable, must also be considered to assess the company's liquidity.
In financial terms, the quick ratio (or acid-test ratio) uses the value of these quick assets in its calculation, dividing them by current liabilities to measure the organization's short-term liquidity. Businesses with a high quick ratio are generally considered better equipped to handle short-term financial challenges.