### FRQuickRatio (CurrentAssets, Inventories, CurrentLiabilities)

Basic and Crystal syntax.

##### Format

`FRQuickRatio(CurrentAssets, Inventories, CurrentLiabilities)`

##### Arguments

- CurrentAssets is a Number or formula. In general, CurrentAssets consist of cash, accounts receivable, inventories, prepaid expenses, and short term marketable investments in a company's balance sheet.
- Inventories is a Number or formula. In general, Inventories consist of raw materials, work in progress, and finished goods in a company's balance sheet.
- CurrentLiabilities is a Number or formula. In general, CurrentLiabilities consists of bank advances, accounts payable, dividends/income taxes payable, and a portion of long term loans due within one year in a company's balance sheet.

##### Action

FRQuickRatio returns the ratio between CurrentAssets (less Inventories) and CurrentLiabilities (for example, QuickRatio = (CurrentAssets - Inventories) / CurrentLiabilities).

##### Typical uses

Since it takes time to convert raw materials to finished goods, and even finished goods are not really a liquid asset, this ratio removes inventories from current assets in calculating the liquidity of the company. It is a measure of how well current liabilities are covered by cash and ready cash equivalent. The higher the ratio, the higher the liquidity.

##### Examples

The following examples are applicable to both Basic and Crystal syntax:

`FRQuickRatio(7.2, 2.2, 2)`

Returns 2.5.

`FRQuickRatio(3, 1.5, 3)`

Returns 0.5.

Note:

- None of the arguments can be negative; you may have to check for negative values before passing the arguments.
- The Formula Editor will automatically check to see if Inventories is smaller than or equal to CurrentAssets. If Inventories is smaller than CurrentAssets, you will receive an error message.

##### Comment

FRQuickRatio is one of the many financial analysis tools used in interpreting the financial position of a company. As in the case of all ratios, it has to be used with caution. It can just be used as a clue and not solid proof for forming a judgment on the financial status of a company.

Neither one of the ratios can be used alone for doing financial analysis and there are no fixed rules on the results of the ratios. Apart from differences between type of industries, result varies among different companies within the same industry and within different account periods. The results should only be used for relative comparison and trend analysis, rather than treating them as something absolute.

Seagate Software, Inc. http://www.seagatesoftware.com Please send comments to: techpubs@seagatesoftware.com