5.2.2 Quick Ratio This ratio is designed to show the amount of cash available to meet immediate payments. It is obtained by dividing the quick assets by quick liabilities. Quick Assets are obtained by deducting stocks from current assets. Quick liabilities are obtained by deducting bank over draft from current liabilities. Quick Ratio
=
Quick Assets Current Liabilities
Year Ratios
Quick Ratio 2003-04 2004-05 2005--06 1.2
1.5
1.4
2006-07
2007-08
1.6
2.0
Table 5. 2 Quick Ratio Analysis
Figure 5. 2 Quick Ratio Analysis Interpretation Standard Ratio is 1:1 Company’s Quick Assets is more than Quick Liabilities for all these 5 years. In 2007-08 the ratio is increasing because of increase in bank and cash balance. So all the years has quick ratio exceeding 1, the firm is in position to meet its immediate obligation in all the years.