Liquidity ratios are a vital measurement of your company’s ability to cover its expenses. The most common ratios are the Current Ratio and the Quick Ratio. The Current Ratio is the reflection of the company’s financial strength. It is measured as the number of times the current assets exceed the current liabilities. The Quick Ratio is similarly calculated however only the Current Assets of Cash and Accounts Receivable balances are used for this ratio. Both ratios are used by lenders and wholesalers extending credit as they are a good indicator of the solvency of your business. The required information for these calculations are reported on your Balance Sheet.
How does your pharmacy compare?
National median Ratios as reported in the 2013 NCPA Digest.
* Current Ratio = 4.0
* Quick Ratio = 1.66
In both cases the higher the result, the better.
To improve your results, reduce short-term debt and shorten your Accounts Payable terms.