Quick assets are the subset of current assets convertible to cash within 90 days — cash, accounts receivable, and marketable securities — explicitly excluding inventory. They form the numerator of the quick ratio.
Quick assets represent a business's most liquid resources: cash and cash equivalents, short-term marketable securities, and net accounts receivable. Inventory and prepaid expenses are excluded because they take longer than 90 days to convert to cash in most business cycles — inventory must be sold and collected, prepaid expenses are consumed rather than liquidated. The quick ratio (quick assets / current liabilities) gives lenders a more conservative liquidity view than the current ratio. A business can have a healthy current ratio while holding most current assets in slow-moving inventory — the quick ratio surfaces that risk. Lenders in asset-based lending and working capital facilities pay close attention to the quick ratio as a covenant metric. For SMBs, understanding which assets are genuinely quick is operationally useful. A $500K AR balance sounds liquid, but if days sales outstanding (DSO) is 90+ days or 30% of AR is more than 90 days overdue, that receivable is not truly a quick asset. Lenders performing accounts receivable due diligence often apply an 'eligible AR' concept — stripping out receivables that fail concentration, aging, or cross-aging tests before calculating borrowing base.
Current assets include all assets expected to convert to cash within 12 months — including inventory and prepaid expenses. Quick assets are the subset convertible within ~90 days: cash, marketable securities, and net AR. The distinction matters because inventory conversion time varies widely by industry — a manufacturer may hold 6+ months of inventory.
A quick ratio above 1.0 means the business can cover all current liabilities with liquid assets alone. Most lenders want to see 1.0 or above for working capital lines. Service businesses and SaaS companies often exceed 2.0. Manufacturing and retail businesses with heavy inventory typically run 0.5–0.9 and compensate with inventory-based borrowing facilities.
Yes, especially for revolving credit facilities and asset-based lending (ABL). ABL lenders calculate a 'borrowing base' from eligible AR (a subset of quick assets) and eligible inventory separately. Lenders often set quick-ratio covenants in credit agreements requiring quarterly certification.
No. Prepaid expenses (insurance, rent, subscriptions) are current assets but not quick assets — they are consumed as services are delivered rather than converted to cash. Exclude them from any quick ratio calculation.