What are Quick Assets?
Assets that have been used or converted into liquidity in under almost a year business process are known as Quick Assets. Liquid money, receivable accounts, marketable securities, equipment, materials, are common examples of these assets.
These assets might be swiftly purchased and sold, and therefore there are no significant losses of value in the process. When we say quickly, we're talking about commodities that can be turned into cash in a year or less. Organizations should carefully handle these assets in order to maintain stability and liquidity.
Understanding of Quick Assets
A strong and profitable company that doesn't even pay dividends might just have a significant amount of these assets on its financial statements or records. Generally, it can be securities that are marketable and Cash Equivalents. In contrast, a company in distress has no liquidity or liquid assets and must rely on loans to meet its financial needs. Accounts receivable is the most common quick asset on records or financial statements in this situation.
Businesses often hold a few of their quick assets in liquid funds as a reserve to fulfil urgent production, trading, or financial necessities. A business with a limited cash level in its assets might well be capable of meeting its liquidity needs by relying on existing debt instruments.
How to Calculate Quick Assets
The formula to determine it is-
Quick Assets = Current Assets – Inventories
Generally, by calculating these assets, the quick ratio can be calculated easily. This indicator is aimed at assessing a business's capacity to meet short-term payment commitments by leveraging its most cash reserves. This is also known as the acid test since it measures whether a corporation can use its near-cash assets to pay off total debts and liabilities.
A company named JHk wants to calculate their assets. In order to do so, it has to determine the value of existing current assets and inventories in hand. So here is the amount of their current assets and inventories-
Current assets = $ 60000
Inventories = $ 40000
To calculate these assets we have to use the mentioned formula which is-
Current Assets – Inventories
= $ 60000 – $ 40000
= $ 20000
So, the value of JHk's quick assets is $ 20000.
- The term Quick Assets is commonly used in businesses and organizations to indicate those assets that can be transformed into liquidity very easily and it is a very crucial and important element in any business.
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