What is the value of quick ratio in order to specify a good business (coffee trade) for bank finance.

A quick ratio indicates how much of your current liabilities you could pay off with cash at one point in time. If you have a quick ratio of  0.50 : 1  that means that you have enough cash to pay off 50 cents of every dollar of current liabilities.

It is a measure of liquidity and, of course, to a bank officer considering a loan application, the more liquidity the better. If you had enough cash on deposit to pay off all of your current liabilities at once your quick ratio would be  1 : 1 (one to one). That would be indicative of a strong business with very good liquidity.

A quick ratio of  0.5 : 1 would be acceptable, and probably still good enough to qualify you for a loan if your other loan qualifications are good. Getting below  0.5 : 1 would make it harder to qualify and maybe disqualify you. It would depend on what your other qualifications are, the value of any collateral you’re putting up, your company’s credit history (past credit performance), and the strength of your other financial statements, including past profitability.

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