A result of 1 means a normal quick ratio. It indicates the company has just enough quick assets to cover its current liability. A quick ratio of less than 1 indicates that the company may not be able to pay off its current liabilities with its quick asset, while a company having a quick ratio larger than 1 could pay off its current liability instantly.
Anything in the 1.2 to 2.0 range is considered a healthy working capital ratio. If it drops below 1.0 you're in risky territory, known as negative working capital. With more liabilities than assets, you'd have to sell your current assets to pay off your liabilities.
Got a ratio over 2.0 and think you're golden? It's not quite that simple. Higher ratios aren't always a good thing. Anything above 2.0 could suggest that the business isn't using its assets to its full advantage.
Got a ratio over 2.0 and think you're golden? It's not quite that simple. Higher ratios aren't always a good thing. Anything above 2.0 could suggest that the business isn't using its assets to its full advantage.