Quick Ratio Calculator – Measure Short-Term Liquidity
The Quick Ratio Calculator (acid-test ratio) helps you measure how easily a business can meet its short-term obligations using only its most liquid assets. Unlike the current ratio, which includes inventory and prepaid items, the quick ratio focuses on assets that can be converted into cash quickly, such as cash, marketable securities and accounts receivable.
This calculator lets you calculate the quick ratio from detailed quick asset inputs, from summarized balance sheet numbers, or by planning for a desired target quick ratio. It is useful for managers, analysts, lenders and business owners who want a clear view of short-term liquidity without relying on inventory sales.
What Is the Quick Ratio (Acid-Test Ratio)?
The quick ratio is a financial metric that compares a company’s quick assets to its current liabilities. It is defined as:
Quick assets generally include:
- Cash and cash equivalents
- Marketable securities
- Accounts receivable
- Other highly liquid current assets
Inventory and most prepaid expenses are usually excluded because they may not be converted into cash quickly enough to cover near-term obligations.
How the Quick Ratio Calculator Works
This tool offers three modes:
- Quick Ratio: Enter detailed quick assets and current liabilities.
- Balance Sheet Mode: Start from total current assets, then subtract inventory and prepaid items.
- Target Quick Ratio: Plan the quick assets or liabilities needed to reach a desired quick ratio.
Mode 1: Quick Ratio from Detailed Quick Assets
In the first tab, you enter cash, marketable securities, accounts receivable, other quick assets and current liabilities. The calculator sums the quick assets and divides them by current liabilities.
Formula
The calculator also shows the liquidity margin:
A positive margin means quick assets exceed short-term obligations, while a negative margin suggests potential pressure on cash or working capital.
Mode 2: Quick Ratio from Balance Sheet
Sometimes you only have high-level balance sheet figures such as total current assets, inventory, prepaid expenses and current liabilities. In that case, the calculator derives quick assets as:
It then computes the quick ratio and shows quick assets as a percentage of current liabilities. This allows you to see how much of your short-term obligations are covered by liquid assets without going into line-item detail.
Mode 3: Target Quick Ratio Planning
The third mode helps you plan toward a target quick ratio. You enter current quick assets, current liabilities and a desired quick ratio. The calculator shows:
- Your current quick ratio.
- The required quick asset level to achieve the target ratio (holding liabilities constant).
- The additional quick assets needed to reach that target.
- The maximum level of current liabilities you could carry at the target ratio with your current quick assets.
Planning Formulas
These relationships help you see whether you need to increase liquid assets, reduce short-term liabilities, or both.
How to Interpret the Quick Ratio
There is no single perfect quick ratio that fits every industry, but some general guidelines are often used:
- Below 0.75: Liquidity may be tight. The business might need careful cash management to meet obligations.
- Around 1.0: Quick assets roughly match current liabilities, often viewed as a reasonable starting benchmark.
- Above 1.2–1.5: Indicates more comfortable liquidity; the business has a buffer of liquid assets.
However, context is important. Some industries operate safely with lower quick ratios because of stable cash inflows, while others need stronger liquidity buffers.
Quick Ratio vs Current Ratio
Both metrics compare assets to current liabilities, but they differ in which assets they include:
- Current Ratio: Uses all current assets (cash, receivables, inventory, prepaids).
- Quick Ratio: Uses only quick assets (cash, marketable securities, receivables and similar items).
Because the quick ratio excludes inventory and prepaid items, it is more conservative and focuses on assets likely to convert to cash quickly. In businesses with slow-moving or highly specialized inventory, the quick ratio can provide a more realistic picture of immediate liquidity.
Examples
Example 1: Quick Ratio from Detailed Inputs
Suppose a company has:
- Cash and equivalents: $25,000
- Marketable securities: $10,000
- Accounts receivable: $20,000
- Other quick assets: $5,000
- Current liabilities: $40,000
Total quick assets are $60,000. The quick ratio is $60,000 ÷ $40,000 = 1.5. This suggests that the company has $1.50 of quick assets for every $1.00 of current liabilities, indicating solid short-term liquidity.
Example 2: Quick Ratio from Balance Sheet
Another company reports:
- Total current assets: $90,000
- Inventory: $30,000
- Prepaid expenses: $5,000
- Current liabilities: $50,000
Quick assets are $90,000 − $30,000 − $5,000 = $55,000. The quick ratio is $55,000 ÷ $50,000 = 1.1, which is slightly above 1.0 and may be considered acceptable in many industries.
Example 3: Planning for a Higher Quick Ratio
A business has $35,000 in quick assets and $30,000 in current liabilities, giving a quick ratio of about 1.17. Management would like a quick ratio of 1.4.
Required quick assets at the target are 1.4 × $30,000 = $42,000. The company would need roughly $7,000 in additional quick assets or an equivalent reduction in current liabilities to reach that target.
How to Use This Tool Effectively
- Use the Quick Ratio tab when you know cash, marketable securities, receivables and other liquid items individually.
- Use Balance Sheet Mode when you only have summarized current assets, inventory and prepaid figures.
- Use the Target Quick Ratio tab to explore “what-if” scenarios and plan for stronger liquidity.
- Compare the quick ratio with other metrics, such as the current ratio and cash flow, for a more complete picture.
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Quick Ratio Calculator FAQs
Frequently Asked Questions About the Quick Ratio
Find answers to common questions about interpreting and using the quick ratio for liquidity analysis.
Not always. A very high quick ratio can indicate strong liquidity, but it may also suggest that the company is holding excess idle cash instead of investing in growth. The right range depends on business model, risk tolerance and industry norms.
Some businesses with predictable cash inflows, strong banking relationships or high inventory turnover may operate safely with a quick ratio below 1.0. Others may need a higher buffer. Quick ratio should be interpreted together with cash flow and industry patterns.
The quick ratio is mainly a business metric, but the idea of comparing liquid assets to short-term obligations can also be applied loosely to personal finances when assessing how easily you can cover near-term bills.