About the Quick Ratio Calculator
The quick ratio — also called the acid-test ratio — measures whether a business can cover its short-term obligations using only its most liquid assets: cash, marketable securities and accounts receivable. Inventory and prepaid expenses are excluded because they cannot reliably be turned into cash quickly without a discount.
Enter the figures from your balance sheet and the calculator returns the quick ratio, the dollar value of quick assets, the surplus or shortfall against current liabilities, and two companion measures: the broader current ratio and the stricter cash ratio.
Lenders, suppliers offering trade credit and investors use the quick ratio to judge liquidity risk, and owners use it to spot a cash squeeze before it arrives. Use balance-sheet values from the same date for every input.
With the default inputs, the quick ratio is 1. Change any value above to recalculate instantly.
How to use the quick ratio calculator
- 1Take the latest balance sheet for your business or the company you are analysing.
- 2Enter cash, marketable securities and net accounts receivable.
- 3Enter inventory and prepaid expenses so the current ratio can be compared.
- 4Enter total current liabilities and read the quick ratio.
Formula and method
Quick assets are the current assets that can be converted to cash within about 90 days at close to their book value: cash, short-term marketable securities and net accounts receivable. Dividing them by current liabilities shows how many dollars of liquid assets back each dollar due within a year.
The current ratio uses all current assets, including inventory and prepaid expenses, so it is always at least as high as the quick ratio. The cash ratio is the strictest test, counting only cash and marketable securities. An alternative quick-ratio method, (current assets − inventory − prepaids) ÷ current liabilities, gives the same answer when those are the only current assets.
- Quick assets
- Cash + marketable securities + accounts receivable
- Current liabilities
- Obligations due within 12 months (payables, short-term debt, accruals)
Worked examples
Wholesaler with heavy inventory
Quick assets are $50,000 + $20,000 + $80,000 = $150,000, exactly matching $150,000 of current liabilities, so the quick ratio is 1.00. Including $130,000 of inventory and prepaids lifts the current ratio to 1.87.
Retailer below 1.0
Only $75,000 of liquid assets stand against $100,000 of current liabilities, a quick ratio of 0.75. The current ratio of 1.40 looks comfortable only because of inventory.
Frequently asked questions
What is a good quick ratio?+
A quick ratio of 1.0 or higher means liquid assets fully cover current liabilities, which most lenders view as healthy. Retailers and restaurants that collect cash immediately often operate below 1.0 safely, so compare within your industry.
Why is inventory excluded from the quick ratio?+
Inventory may take months to sell and may need to be discounted to sell fast. Excluding it tests whether the business could meet its obligations even if sales stalled.
What is the difference between the quick ratio and the current ratio?+
The current ratio divides all current assets by current liabilities. The quick ratio removes inventory and prepaid expenses, so it is a stricter, more conservative measure of liquidity.
Can a quick ratio be too high?+
Yes. A very high quick ratio can mean the business holds idle cash or is slow to collect receivables. Excess cash might earn more if invested in growth or used to pay down expensive debt.
Is the acid-test ratio the same as the quick ratio?+
Yes, they are two names for the same measure. The name comes from the historical acid test used to check whether metal was real gold.