What is Super Quick Ratio?

Super Quick or Cash Ratio

This ratio goes one step ahead of current, liquid ratio & is calculated by dividing super quick assets by current liabilities of a business. It is called super quick or cash ratio because unlike other liquidity ratios it only takes into account “super quick assets”. This is the most stringent test of a business’ current liquidity situation. 

Super quick assets strictly include cash & marketable securities (since they can almost instantly be converted to cash)

Current liabilities would include overdraft, creditors, short-term loans, outstanding expenses, etc.

 

Formula to calculate super quick or cash ratio 

super quick ratio

 

Example of Super Quick or Cash Ratio

Unreal corporation has submitted the below information regarding their current assets and current liabilities, calculate their super quick ratio.

 Current Assets  Amt  Current Liabilities  Amt
 Cash & Equivalents  20,000  Outstanding Expenses  15,000
 Marketable Securities   150,000  Provision for Expenses  10,000
 Inventories  40,000  Creditors  20,000
 Debtors  25,000  Bills Payable  15,000
 B/R  5,000    
       
 Total  2,40,000  Total  60,000

 

Calculation:

Super Quick Assets/Current Liabilities

(Cash + Marketable Securities)/Current Liabilities

= (20,000 + 150,000)/60,000

= 1,70,000/60,000

= 2.833

 

Higher the super quick ratio better the liquidity condition of a business. In the above case for every 1 unit of current liability the company has 2.833 units of super quick assets.