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Quick Ratio Calculator

Find your quick ratio.

How it is calculated

The tool computes quick ratio = (current assets − inventory) / current liabilities. Current assets are everything the company expects to turn into cash within a year, inventory is the stock of goods held for sale, and current liabilities are debts due within a year. All three amounts must be in the same currency.

Note that this tool subtracts inventory only from the total you enter. A stricter textbook version also removes prepaid expenses and other items that are hard to cash quickly, so if you want that, leave them out of the current-assets figure yourself. Liabilities must be greater than zero or there is no result. The ratio is shown with two decimals and has no unit.

Worked example

A company has current assets of 500,000, of which 150,000 is inventory, and current liabilities of 250,000. Quick assets are 500,000 − 150,000 = 350,000. Dividing by liabilities gives 350,000 / 250,000 = 1.40. The company holds 1.40 of quickly available assets for every 1.00 of short-term debt.

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Common mistakes

  • Entering total assets rather than current assets. Buildings and equipment cannot be turned into cash to pay near-term bills.
  • Putting long-term debt in the liabilities field. Only obligations due within about a year belong there.
  • Comparing a quick ratio across industries with very different inventory habits, such as retail and software.
  • Treating anything above 1 as automatically safe. If most quick assets are receivables that customers pay late, cash can still run short.

Sources

About this calculator

The quick ratio, also called the acid-test ratio, measures a company's ability to cover short-term liabilities using only its most liquid assets: (current assets − inventory) ÷ current liabilities — deliberately excluding inventory, which can be slow or difficult to convert to cash. This tool subtracts only inventory from the current-assets total you enter; a stricter version also removes prepaid expenses and other items that are hard to cash quickly, so leave those out of the current-assets figure yourself.

Accountants, lenders, and investors use it as a stricter check than the current ratio when assessing financial health, since a company sitting on a lot of unsold inventory can look solvent by the current ratio while actually struggling to pay bills due in the next few weeks; a quick ratio at or above 1.0 is generally considered healthy.

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Comments (1)

  • Editorial team

    This version subtracts only inventory from current assets, so prepaid expenses and other slow items still count as quick. Stricter analysts use cash, short-term investments and receivables only, which can give a lower figure. Compare the ratio with companies in the same industry, because retailers often sit well below software firms. Both inputs must use one currency and one period. Which sector are you analysing? Tell us what ratio feels normal there.

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