Quick Assets

Written by Fmi.Online Tuesday November 15, 2022
Quick assets are assets that can be used up or realized (turned into cash) in less than one year or operating cycle. These assets usually include cash, cash equivalents, accounts receivable, inventory, supplies, and temporary investments.    

Explanation:

The term quick assets is often used interchangeably with the term current assets. Current assets are referred to as quick assets because of how fast they are converted into cash. GAAP requires that current assets or quick assets be separated from long-term assets on the face of the balance sheet. This gives investors and creditors insight as to how liquid the company is. In other words, investors and creditors can see how easily current liabilities can be paid.    

In a nutshell:

  • Current and quick assets are two categories from the balance sheet that analysts use to examine a company’s liquidity.
  • Quick assets are equal to the summation of a company’s cash and equivalents, marketable securities, and accounts receivable which are all assets that represent or can be easily converted to cash.
  • Quick assets are considered to be a more conservative measure of a company's liquidity than current assets since it excludes inventories.
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