Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsQuick ratio =Current assets – inventoryCurrent liabilities – overdraftSometimes called the “acid test ratio”, this is one of the best measures ofliquidity. By excluding inventories which could take some time to turn into cashunless the price is ”knocked down,” it concentrates on real, liquid assets. Ithelps to answer the question: If the business does not receive income for aperiod, can it meet its current obligations with the readily convertible ”quick”funds on hand?TIPThe quick ratio will give you a good indication of the“readily” available cash to meet current debt obligations24Chapter 2-5 p22-65 Eng.indd 248/15/11 5:01:51 PM