Quick Ratio:

The quick ratio is an indicator of a company’s short-term liquidity. Position and measures a
company’s ability to meet its short-term obligations with its most liquid assets. Since it indicates
the company’s ability to instantly use its near-cash assets(assets that can be converted quickly to
cash)to pay down current liabilities, it is also called the acid test ratio.

The quick ratio measures the amount of liquid assets available against the amount of current
liabilities of a company .Liquid assets are the assets that can be quickly converted into cash with
minimal impact on the price received in the open market, while current liabilities are a
company's debts or obligations that are due to be paid to creditors within one year.

Quick Ratio=Liquid Assets/Current Liabilities.

Liquid Assets =Current Assets-(Inventories Prepaid Expense))

Absolute Liquid Ratio:

The relationship between the absolute liquid assets and current liabilities is established by this
ratio. Absolute Liquid Assets take into account cash in hand, cash at bank, and markatable
securities or temporary investments. The most favorable and optimum value for this ratio should
be 1:2.

Absolute Liquid Ratio = Absolute Assets/Current Liabilities

Absolute Assets= Cash in hand, Cash at bank, and Marketable securities or temporary
Investment)