Quick assets

Definition

Quick assets, also known as liquid assets or current liquid assets, refer to a company’s most readily convertible and easily marketable assets into cash within a short period.

What are quick assets?

Quick assets are a subset of current assets. They can be quickly be converted into cash, typically within 90 days, without significantly affecting their value. They include cash, marketable securities, and accounts receivable.

Quick assets are used to measure a company’s short-term liquidity and its ability to meet immediate financial obligations. The main components of quick assets typically include:

1. Cash: This is the most liquid asset, representing physical currency and funds held in bank accounts.
2. Cash equivalents: These are highly liquid investments that are easily convertible to known amounts of cash and have a short maturity period
3. Accounts receivable: These are amounts owed to a company by customers for products or services that have been delivered but not yet paid for. 
4. Marketable securities: These are liquid financial instruments that can be quickly converted into cash, such as stocks, bonds, and other short-term investments.

Quick assets are essential in assessing a company’s liquidity and ability to meet its short-term obligations. ​

Quick asset formulas

Quick asset formulas are used to measure a company’s liquidity by assessing its ability to meet short-term obligations with its most liquid assets. The two main formulas are:

• Quick assets = Cash and cash equivalents + Marketable securities + Accounts receivable
• Quick ratio = Quick assets / Current liabilities

These formulas help determine a company’s financial health by focusing on its readily available assets.

Example of quick assets

Company XYZ’s balance sheet shows the following assets:

• Cash: $50,000
• Marketable securities: $30,000
• Accounts receivable: $20,000
• Inventory: $40,000
• Prepaid expenses: $10,000

To calculate the quick assets, we exclude inventory and prepaid expenses since they are not easily convertible into cash:

Quick assets = $50,000 + $30,000 + $20,000 = $100,000

In this example, Company XYZ’s quick assets total $100,000, which represents the amount of assets that can be quickly converted into cash to meet short-term obligations or unexpected expenses.