Quick ratio (likviditetsgrad 2)

Likviditetsgrad 2, or the quick ratio, is a financial key indicator that measures a business's ability to pay down its short-term financial obligations by comparing the most liquid current assets with current liabilities.

The quick ratio is a more restrictive measure of liquidity than the current ratio, since it excludes inventory from the most liquid assets. This prevents inventory that is not readily saleable from being counted.

How it is calculated

The quick ratio is calculated by dividing current assets less inventory by current liabilities. The formula is as follows:

Quick ratio = (Current assets − Inventory) / Current liabilities

What is it used for?

The quick ratio is used to assess how well a business can meet its short-term financial obligations without relying on the sale of inventory. It gives insight into the business's liquidity and its ability to handle short-term financial pressure at short notice.

Tips for improving your quick ratio

1. Increase liquid funds. Make sure the business has a sufficient quantity of cash and liquid funds available to meet short-term obligations.
2. Improve collection of short-term receivables. Put effective routines in place for invoicing, collecting and following up outstanding trade receivables in order to convert them into liquid funds quickly.
3. Reduce current liabilities. Identify opportunities to reduce current liabilities, for example through refinancing or negotiations with creditors.
4. Control inventory. Optimise inventory by avoiding overstocking or inefficient stock management that can tie up liquid funds.
5. Effective cash flow management. Put strategies in place to optimise cash flow, for example tight credit management and an improved payment policy with suppliers.
6. Negotiations with suppliers. Negotiate payment terms with suppliers in order to obtain more flexible and favourable payment conditions.