Quick Ratio Calculator
Calculate the quick ratio (acid-test ratio) — quick assets divided by current liabilities — for a conservative view of short-term liquidity that excludes inventory. Use it when assessing companies with significant inventory or any time you want a stress-test of whether short-term obligations can be paid without selling stock.
Last updated: May 2026
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About this calculator
The formula is: quick ratio = quick assets ÷ current liabilities. Quick assets — sometimes called liquid assets — include cash, cash equivalents, marketable securities, and accounts receivable. The defining exclusion is inventory: unlike the current ratio, the quick ratio assumes inventory cannot be reliably converted to cash quickly. An equivalent formulation is (current assets − inventory − prepaid expenses) ÷ current liabilities, which produces the same answer for most companies. The ratio is unitless; a quick ratio of 1.0 means the company has exactly enough liquid assets to cover near-term obligations; above 1.0 indicates a buffer; below 1.0 suggests the company would need to either generate new cash from operations, sell inventory, or refinance. The conventionally healthy quick ratio is 1.0 or higher, though this varies by industry: businesses with fast inventory turnover (grocery stores, fast-food chains) often have low quick ratios that are nonetheless fine because inventory does in fact convert quickly. Software and service businesses, with no inventory at all, have current and quick ratios that are nearly identical. Edge cases: receivables included in quick assets may not all be collectible — analysts often subtract an allowance for doubtful accounts or use only "current" (not aged) receivables for a more conservative view. The "acid test" name comes from the metaphor of testing gold for purity with acid: it is a stricter, more rigorous liquidity check than the current ratio. Use both ratios together — the gap between them tells you how reliant the business is on inventory sales for short-term solvency.
How to use
Example 1 — Tech company with mostly receivables. Cash and equivalents: $35,000,000; marketable securities: $12,000,000; accounts receivable: $48,000,000; inventory: $4,000,000; current liabilities: $42,000,000. Quick assets = 35M + 12M + 48M = $95,000,000. Enter 95000000 for Quick Assets and 42000000 for Current Liabilities. Result: 2.26. Verify: 95M / 42M ≈ 2.262. ✓ A quick ratio above 2 is strong for a tech company — significant cash and receivables relative to short-term obligations, with no reliance on inventory liquidation. Example 2 — Specialty retailer with heavy inventory. Cash: $5,000,000; marketable securities: $0; accounts receivable: $8,000,000; inventory: $42,000,000; current liabilities: $28,000,000. Quick assets = 5M + 0 + 8M = $13,000,000. Enter 13000000 and 28000000. Result: 0.46. Verify: 13M / 28M ≈ 0.464. ✓ A quick ratio of 0.46 is concerning on its own — quick assets cover less than half of current liabilities, meaning the business depends on selling inventory and converting it through receivables to meet near-term obligations. For a healthy fast-turning retailer this might still be fine; for a specialty retailer with slow-moving inventory and seasonal demand, this is a yellow flag.
Frequently asked questions
Why does the quick ratio exclude inventory?
Inventory is the least liquid current asset. To turn inventory into cash, you first have to sell it (often at a discount in a hurry), then wait for the customer to pay (which usually takes 30–60 days for B2B sales). Specialty or seasonal inventory may not be saleable at all without heavy discounting — think of a clothing retailer holding last season's collection, or a tech company with obsolete components. By stripping out inventory, the quick ratio asks: if you had to pay all your near-term bills tomorrow using only the cash, near-cash assets, and receivables you already have, could you do it? It is a more pessimistic view of liquidity than the current ratio and is particularly useful when evaluating businesses with significant or hard-to-sell inventory.
What is a good quick ratio?
The conventional benchmark is 1.0 or higher — meaning the company has at least as much in liquid assets as in current liabilities. But industry-specific norms vary widely. Software businesses with no inventory often run quick ratios of 2–4 because their balance sheet is heavy on cash and receivables. Manufacturers and retailers routinely run quick ratios below 1.0 because their working capital is tied up in inventory by design — Walmart famously operates at quick ratios around 0.2–0.3 and is in no trouble at all because its inventory converts faster than its payables come due. The most informative comparison is industry peers and the company's own historical trend. A quick ratio falling steadily over time is more concerning than the absolute number, because it usually reflects either accumulating short-term debt or eroding receivable quality.
How is the quick ratio different from the cash ratio?
The cash ratio is even more conservative — it includes only cash and cash equivalents (sometimes plus marketable securities) in the numerator, excluding accounts receivable. The cash ratio asks: could you pay all current liabilities from cash alone, without collecting any receivables? For most companies, the cash ratio is well below 1.0 even when current and quick ratios look healthy, because few businesses keep enough cash on hand to cover all near-term obligations. A cash ratio above 1.0 is often a yellow flag in the other direction — it suggests excess idle cash that could be deployed more productively (investments, share buybacks, acquisitions, dividends). Use cash ratio when you specifically want to stress-test what happens if revenue stopped tomorrow and receivables couldn't be collected — a worst-case scenario.
What are the most common mistakes people make using the quick ratio?
The first is using the current ratio formula by mistake — leaving inventory in the numerator defeats the entire purpose. The second is including questionable receivables at face value; aged receivables (90+ days outstanding) are often uncollectible and inflate the ratio artificially. The third is comparing the quick ratio across industries with very different working-capital structures — a 0.5 quick ratio is normal for a fast-turning retailer but alarming for a software company. The fourth is using a single snapshot without context: seasonality, recent debt issuance, or a one-time large receivable can swing the ratio without reflecting underlying health. The fifth is treating the quick ratio as a standalone solvency indicator; pair it with the current ratio (to see how much of liquidity depends on inventory) and operating cash flow (to see whether the business is generating cash organically).
When should I not use the quick ratio?
Skip it for banks and other financial institutions whose balance sheets are dominated by financial assets (loans, securities) that don't fit the standard quick-asset categories — regulatory capital and liquidity-coverage ratios are the relevant metrics there. For early-stage companies with little revenue, the quick ratio mostly reflects how much cash they raised in the last funding round and tells you nothing about business quality. For service businesses with no inventory, the quick ratio and current ratio are essentially the same number, so picking one is enough. Do not rely on it during periods of rapid receivable growth — a surging A/R balance from rising sales can mask real liquidity issues if collections slow. For comprehensive liquidity analysis, use the quick ratio alongside the current ratio, cash ratio, days sales outstanding, and operating cash flow to triangulate.