Quick Ratio

A printable cheatsheet with calculations
and notes

Download FREE Ratio Diagram

Instead of calculating each ratio individually

Let our ratio tool instantly calculate your ratios. Input your financial data once and get multiple results.
START AUTO CALCULATION

Quick Ratio

Quick Ratio =

( Current assets - Inventory )

Current Liabilities

AKA: Acid Test Ratio

INTERPRETATION

Quick Ratio measures the ability of a company to pay its current liabilities when they come due with only quick assets (which can convert to cash within 90 days or in the short term).

The aka acid test ratio measures the immediate amount of cash available to satisfy the short-term debt.

Note: expanded calculation

Add cash, cash equivalents, short-term investments, and current receivables together (do not include inventory), then divide them by current liabilities.

EXAMPLE

Cash: $10,000

Accounts Receivable: $5,000

Inventory: $5,000

Stock Investments: $1,000

Prepaid taxes: $500

Current Liabilities: $15,000

Quick Ratio = 10000+5000+1000 / 15000 = 1.07

A 1.07 ratio means that M&M can pay off all its current liabilities with quick assets and still have some quick assets left over.

BENCHMARK: PG, ROT

A higher quick ratio is more favorable for companies because it shows that they have more quick assets than current liabilities.

A company with a quick ratio of 1 indicates that quick assets equal current assets. A ratio of 2 shows that the company has twice as many quick assets as current liabilities.

Generally, 0.50 to 1.0 are considered acceptable Quick Ratios.

Quick Ratio:

ABBREVIATION KEY:

ROT: Rule of thumb
HA: Historical Average (organization’s historical average)
PG: Peer Group average
EB: Economic Benchmark

DISCLAIMER: The interactive calculators on this site are self-help tools intended to help you visualize and explore your financial information. They are not intended to replace the advice of a qualified professional. Because each business is different, we can not guarantee accuracy.