Quick
Quick Ratio
The quick ratio is “a quick heuristic to asses whether new business is growing way faster than the loss of existing business. Also called the “acid test”, a quick ratio is most relevant to business that has been around for at least a year, when a portion of the first year of customer’s start churning.” We’ve personally found the quick ratio to help us quantify growth accounting into a single metric to understand and benchmark growth efficiency against other companies. The Quick Ratio gives a more accurate overview of a company’s financial health than the Current Ratio as it ignores liquid assets such as inventories. [1] [2]
A good quick ratio should be > 4 (For every $1 of downsell and churn, company is generating an additional >$4 of new and expansion) [3]
[1] Retrieved May 21, 2021, from https://medium.com/signalfire-fund/top-5-metrics-vcs-look-at-for-series-a-b-c-c6a0171fd200
[2] 29 Financial KPIs for Your Financial KPI Dashboard | Scoro. Retrieved May 21, 2021, from https://www.scoro.com/blog/financial-kpis-for-financial-kpi-dashboard/
[3] Retrieved May 21, 2021, from https://www.reforge.com/brief/the-8-most-important-metrics-for-marketplace-growth
[4] A Quantitative Approach to Product Market Fit, https://tribecap.co/a-quantitative-approach-to-product-market-fit/
[5] Retrieved May 21, 2021, from https://medium.com/swlh/diligence-at-social-capital-part-1-accounting-for-user-growth-4a8a449fddfc