The Impact of Quick Ratio on Financial Security

The financial security of a listed company's assets should encompass two aspects: first, maintaining relatively stable cash flow and current asset ratios; second, ensuring strong short-term liquidity to avoid impacting profit stability. Therefore, when analyzing the security of a listed company's assets, the following two perspectives should be considered:

First, the greater the liquidity of a listed company's assets, the higher its financial security. For example, consider a listed company with RMB 5 million in assets. In the first scenario, all assets are equipment; in the second, 70% are physical assets, and the remainder are financial assets. If the company faces a liquidity crisis and urgently needs to liquidate assets to repay debts, which scenario allows faster liquidation? Clearly, the latter. Current assets are more liquid than fixed assets, particularly marketable securities, which can be easily sold in securities markets, and bills, which can be discounted in money markets. Many companies fail not due to insufficient total assets but because of illiquidity, rendering them unable to meet debt obligations promptly. Thus, asset liquidity directly impacts financial security.

A minimum ratio must be maintained between current assets and short-term liabilities. If this ratio is unmet, the company must either increase current assets or reduce short-term debt. This ratio is called the current ratio—the proportion of current assets to current liabilities—measuring a company's ability to liquidate assets to repay short-term debts. It indicates how much current asset coverage exists per unit of current liability. The current ratio is a common metric for assessing solvency, ensuring that after settling short-term debts, the company retains sufficient working capital for daily operations. General practice suggests a current ratio above 200% to balance solvency and operational continuity. Note that industry-specific factors—such as business nature, operating cycles, and liquidity needs—vary, making the 200% benchmark non-absolute.