What is Super Quick Ratio?

Super Quick Ratio or Cash Ratio

This ratio goes one step ahead of current ratio, liquid ratio & is calculated by dividing super quick assets by the 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 

Formula super quick ratio

 

Example of Super Quick or Cash Ratio

Unreal corp. 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, which is good.

>Read What is Operating Cash Flow Ratio?