A quick ratio below 1:1 indicates that you probably cannot generate enough cash to pay your bills on time, and your bills are growing faster than your cash. A quick ratio of approximately 0.7:1 is generally considered normal for companies in distribution, since they often collect from their customers as fast as or faster than they have to pay their own suppliers. This ratio indicates that your highly collectible current assets roughly balance your current debts and that most of the time you should be able to pay your bills, including salaries, taxes, and debt payments, on time.
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Your low quick ratio may be due to a number of factors: you are not making enough profit on each item you sell to generate enough cash; your prices may be too low or your product costs too high; you may be building up and paying for inventory faster than you can sell it; you may have invested in startup of a new business or product line; or you may have to buy for inventory in anticipation of seasonal sales (for example, buying Christmas tree ornaments in July).
