QUICK RATIO Definition

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QUICK RATIO (or Acid Test Ratio) is a more rigorous test than the Current Ratio of short-run solvency, the current ability of a firm to pay its current debts as they come due. This ratio considers only cash, marketable securities (cash equivalents) and accounts receivable because they are considered to be the most liquid forms of current assets. A Quick Ratio less than 1.0 implies "dependency" on inventory and other current assets to liquidate short-term debt. Formula: (Cash + Cash Equivalents + Accounts Receivable) / Total Liabilities

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PRIME RATE is the interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates; mortgage interest rates for example.

PROPRIERTORSHIP see SOLE PROPRIERTORSHIP.

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