What are quick assets?

Quick assets, or liquid assets, are company-owned assets that can be easily and quickly converted into cash with minimal or no loss in value.

Quick assets are essential for businesses because they allow them to:

• Meet short-term obligations, e.g. cover current liabilities such as accounts payable, accrued expenses, and upcoming loan payments
• Quickly access cash to seize unexpected business opportunities or invest in profitable ventures
• Act as a buffer during economic downturns

Examples of quick assets:

• Cash or any cash equivalent, such as short-term government bonds or treasury bills
• Marketable securities – readily tradable securities like stocks and bonds that can be sold on a stock exchange without a significant price drop
• Accounts receivable – amounts owed to the business by customers for goods or services purchased on credit

Note

Companies and investors use the quick ratio, also known as the acid-test ratio, to assess a company's ability to meet its short-term obligations using its most liquid assets. A higher quick ratio indicates a company has a greater ability to cover its short-term debts.

Frequently asked questions

How do quick assets differ from current assets?

Quick assets are highly liquid, meaning they can be converted to cash within a short period.

Current assets include all assets that are expected to be converted to cash within one year. This broader category also includes inventory, which may take longer to sell than other quick assets.

What affects the liquidity of quick assets?

The liquidity of quick assets is affected by:

• Market conditions, as economic downturns can make it harder to sell marketable securities without a loss
• Creditworthiness of customers, as the collectibility of accounts receivable can impact their liquidity if customers default on payments

How can companies improve their quick asset ratio?

Companies can improve their quick asset ratio by:

• Collecting outstanding receivables promptly, e.g. implementing effective credit collection policies
• Managing inventory efficiently, e.g. maintaining optimal inventory levels to avoid slow-moving stock
• Investing in highly liquid securities, e.g. holding a portion of their cash equivalents in highly marketable investments