Quick Sales Ratio (QSR)

Quick sales ratio (QSR) shows a qualitative part of the financial result, i.e. a net sales volume or net income.

Alternative names of the Quick Sales Ratio:

  • QSR
  • Quick Sales Ratio

What Does the Indicator of QSR Show?

The indicator reflects the ratio of sales proceeds (according to the cash flow statement) to net income (according to the income statement). It allows estimate the quality of income, i.e. defines a portion of money it contains. Experts compare cash flows with a financial result adjusted for receivables. Receivables show the amount of advances and underpayments which is not recorded in the income statement.

Formula of the Quick Sales Ratio

The indicator is determined analysing the cash flow statement and income statement using the following formula:

QSR = Sales proceeds / Net sales volume

In order to define the amount of sales proceeds, it’s necessary to perform the following calculations:

Net sales – Total receivables + Write-offs of receivables + Changes in receivables and advances.

Normative Value of Quick Sales Ratio

Of course, it is perfect for an enterprise when the transfer of funds to the account occurs at the moment of income emergence. However, the experience shows the situations may be very different and it frequently happens the company receives income and pays taxes, but real money has not arrived yet. The higher the ratio of incoming cash flow to the income, the higher the solvency of the enterprise. However, if the indicator is significantly lower than 1, it is necessary to review the payment policy regarding debtors and creditors.