Quick Liquidity Ratio Law and Legal Definition
In insurance, quick liquidity ratio is quick liquid assets divided by net liabilities plus cedes reinsurance balances payable. Quick liquid assets means sum of liquid cash, unaffiliated short-term investments and bonds maturing within one year, five year government bonds, and 80% of unaffiliated common stocks. These liquid assets are easily convertible into cash if there is an emergency.
In finance, quick liquidity ratio is an indicator of a company's short-term liquidity. It measures a company's ability to meet its short-term obligations with its most liquid assets. The higher rate of the quick liquidity ratio ensures a company’s better financial position. It is also known as the "acid-test ratio" or the "quick assets ratio".
