Quick Ratio Calculator
Acid-test ratio for liquidity
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Need a fast answer on acid-test ratio for liquidity? Quick Ratio Calculator answers with the steps beside it. Fill in Cash & Equivalents, Accounts Receivable and Current Liabilities on Quick Ratio and read your answer immediately. Quick Ratio displays each intermediate figure as well. Anyone comparing options in Finance can use Quick Ratio to compare scenarios. You can disconnect once Quick Ratio has loaded; the arithmetic runs locally. Quick Ratio is part of the Finance collection on CalcProMaster, alongside quick ratio calculator acid test ratio, free calculators and more. The labels in Quick Ratio match the terms in its result. Quick Ratio stays bookmarked for next time.
What the defaults give
$50,000 of cash plus $30,000 of receivables against $100,000 of current liabilities gives a quick ratio of 0.80.
The tool rates that marginal: the business can cover four-fifths of its near-term obligations from liquid assets, but not all of them.
The formula
Quick ratio = (cash + receivables) ÷ current liabilities
Also called the acid-test ratio. It is the current ratio with inventory removed, on the reasoning that stock cannot be turned into cash at short notice without a discount. A supermarket with a fast stock turn can run a low quick ratio safely; a manufacturer with slow-moving inventory cannot.
Worked examples
$50k cash, $30k receivables, $100k liabilities → 0.80, marginal
$25k cash → 0.55, marginal
$100k cash → 1.30, healthy
$15k receivables → 0.65, marginal
$60k receivables → 1.10, healthy
$50k liabilities → 1.60, healthy
$200k liabilities → 0.40, concerning
Receivables are worth more to this ratio than cash per dollar of liability, because the denominator is what changes. Doubling cash from $50k to $100k adds 0.5; halving liabilities from $200k to $100k adds 0.8. Reducing what you owe moves the number fastest.
Reading the bands
Above 1.0 the business can pay every current liability from quick assets and have change. Between 0.5 and 1.0 it depends on collecting receivables on time. Below 0.5, a single missed payment or a slow month can force borrowing.
Above about 2.0 the ratio stops being reassuring and starts being a question: cash sitting idle could be invested, used to pay down debt, or returned to owners. A very high quick ratio is sometimes a sign of a business that cannot find anything to do with its money.
What it leaves out
Receivables are only worth their book value if they are collectible. A ratio of 1.1 built on receivables 90 days overdue is weaker than 0.8 built on invoices due next week. Nor does the ratio see a revolving credit line that could cover a shortfall — access to undrawn facilities matters as much as the balance sheet.
Seasonality distorts it. A retailer measured in January, after the holiday stock has sold, looks far stronger than the same business measured in October. Compare the ratio against the same month in previous years rather than against an absolute threshold.
Frequently Asked Questions
What is a good quick ratio?
Around 1.0 or above is comfortable. 0.8 is marginal, and below 0.5 is a warning sign.
How is it different from the current ratio?
Inventory is excluded. The quick ratio counts only cash and receivables, so it is a stricter test of short-term liquidity.
Why is inventory excluded?
Stock cannot be converted to cash quickly without discounting it, so it is a poor guide to whether this month’s bills can be paid.
Can a quick ratio be too high?
Yes. Above about 2.0 it can mean idle cash that should be invested or returned, rather than strength.
Does the ratio include overdrafts?
Current liabilities usually include short-term borrowings. Normal overdrafts are sometimes netted against cash, which changes the answer.
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