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. It is a stricter liquidity test than the current ratio because it excludes inventory and prepaid expenses, which may not be convertible to cash quickly (or at all) without loss.
What this calculator includes
This calculator treats “quick assets” as the sum of:
- Cash and equivalents (cash on hand, checking, very short-term cash-like holdings)
- Marketable securities (short-term investments that can be sold quickly)
- Accounts receivable (amounts customers owe that are expected to be collected soon)
It then divides total quick assets by current liabilities (obligations due within one year).
Quick ratio formula
The quick ratio is calculated as:
Component notes (to reduce input errors)
- Cash & equivalents: consider excluding restricted cash if it isn’t available to pay current bills.
- Marketable securities: use near-cash, liquid holdings intended for short-term use (not long-term strategic investments).
- Accounts receivable: use the collectible portion; if you have an allowance for doubtful accounts, recognize that not all A/R converts to cash.
- Current liabilities: include accounts payable, accrued expenses, taxes payable, short-term debt, and the current portion of long-term debt.
How to interpret the quick ratio
Interpretation depends on industry norms, seasonality, and how reliable receivables are, but a common rule of thumb is:
- < 1.0: the business may not be able to cover near-term obligations using only quick assets (may need inventory sales, refinancing, or improved collections).
- ~ 1.0 to 2.0: often indicates adequate short-term liquidity for many businesses.
- > 2.0: can indicate a strong liquidity cushion; in some cases it may also suggest under-investment of cash (context matters).
Worked example
Suppose a company reports:
- Cash & equivalents: $50,000
- Marketable securities: $20,000
- Accounts receivable: $80,000
- Current liabilities: $100,000
Total quick assets = 50,000 + 20,000 + 80,000 = $150,000.
Quick ratio = 150,000 / 100,000 = 1.50.
That means the company has $1.50 of highly liquid assets for each $1.00 of short-term liabilities, suggesting a reasonable liquidity buffer—assuming receivables are collectible and securities are readily saleable.
Quick ratio vs. current ratio (comparison)
| Metric | What it includes | What it excludes | Best used for |
|---|---|---|---|
| Quick ratio (acid-test) | Cash & equivalents + marketable securities + A/R | Inventory, prepaid expenses, other less-liquid current assets | Stress-testing near-term liquidity without relying on inventory |
| Current ratio | All current assets | — | Broader snapshot of short-term solvency (less strict) |
Where to find the inputs
- Balance sheet: cash and equivalents, short-term investments/marketable securities, accounts receivable, total current liabilities.
- Notes to financial statements: details on restricted cash, receivable quality/aging, and investment liquidity.
Limitations & assumptions
- Receivables may not be fully collectible: the ratio assumes A/R turns into cash in time; weak customer credit or disputes can reduce real liquidity.
- Marketable securities may not be liquid in stress: prices can drop and bid/ask spreads can widen during market disruptions.
- Timing matters: “current” means due within a year, but a large payable due next week is more urgent than one due in 11 months.
- Industry benchmarks vary: retailers, manufacturers, SaaS firms, and banks can have very different normal ranges.
- Seasonality can distort results: quarter-end balance sheets may not reflect typical in-period liquidity.
- Accounting classifications differ: what counts as “equivalents” or “short-term investments” can vary by company and reporting standards.
- Not financial advice: this calculator provides a simple liquidity metric; use it alongside cash flow analysis and other ratios.