Add the cash and accounts receivable figures on the assets side, and write down the sum. Separately, add accounts payable and any other current obligations listed on the liabilities side, and write down this sum. Then divide the first number by the second. What do you get? As a rule, the ratio should be greater than 1.00. If it isn’t, it means you don’t have enough cash and near cash to cover your short-term obligations (those due in the next twelve months). Accountants call this the quick ratio or acid test. It’s a useful tool for estimating at a glance whether your company is facing
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