Quick Ratio and current ratio
Why is Accounts recievables amount not included in quick and current ratio??
We may collect money from debtors on time by providing early settelment Discounts.
Hi,
Accounts Receivable are actually included in the current assets section and, therefore, are included in the numerator of current and quick ratios.
Best,
The 365 Team
@365 financial analyst team kidnly look into it
Hi,
You are right, accounts receivable are sometimes not included in some modified versions of these ratios in certain contexts.
For example:
- In some industries or situations where the company has long-term receivables or has significant challenges in collecting them, the accounts receivable might be adjusted or excluded from certain liquidity measures to provide a more conservative view.
- Sometimes, companies might use a cash ratio or another stricter metric that doesn’t include receivables because it’s even more conservative.
In the current video, we assumed that accounts receivable would not be collected from clients and therefore we excluded this amount from the current assets.
I hope this makes sense.
Best,
365 Team