Quick Ratio Calculator

Calculate the quick ratio

The quick ratio, also called the acid-test ratio, is a strict measure of a company's ability to meet its short-term obligations using only its most liquid assets. It is calculated by subtracting inventory from current assets and dividing the result by current liabilities. Inventory is excluded because it can take time to sell and convert into cash, so the quick ratio focuses on cash, marketable securities and receivables, the assets that can be turned into cash quickly. A quick ratio of one means the company can cover its current liabilities without relying on selling inventory.

This makes it a more conservative gauge of liquidity than the current ratio.

When the quick ratio matters

The quick ratio is especially useful for businesses that hold a lot of inventory or whose inventory is slow to sell, because in those cases the current ratio can paint an overly rosy picture. Lenders and analysts look at the quick ratio when they want assurance that a company could handle a sudden demand for payment. A ratio below one is not automatically alarming but warrants a closer look at cash flow.

As with other ratios, interpret the quick ratio in the context of the industry and alongside other measures rather than in isolation. All calculation happens locally in your browser.

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