Quick Ratio Calculator

Calculate your company's ability to meet short-term obligations with liquid assets

Financial Data

Cash & Cash Equivalents ($)

Marketable Securities ($)

Accounts Receivable ($)

Current Liabilities ($)

Quick Ratio Results

Quick Ratio (Acid-Test Ratio)

-

x

(Cash + Securities + Receivables) / Current Liabilities

Liquidity Gauge

0.00x

0x (Risky) 1x (Healthy) 2x (Strong)

Industry Benchmarks

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Liquidity Assessment

Assessment will appear here...

This calculator helps assess your company's ability to meet short-term obligations without selling inventory. Print Results

1. What is the Quick Ratio?

The Quick Ratio (or Acid-Test Ratio) measures a company’s ability to pay short-term liabilities using its most liquid assets (excluding inventory). It’s a stricter test of liquidity than the Current Ratio.

Key Takeaways

✔ Formula:

$$\text{Quick Ratio}=\frac{\text{Cash + Marketable Securities + Accounts Receivable}}{\text{Current Liabilities}}$$

✔ Benchmark: 1.0 or higher is ideal (means liquid assets ≥ liabilities).
✔ Purpose: Assesses if a business can survive a sudden cash crunch.

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2. How to Calculate the Quick Ratio (Step-by-Step)

Example Data:

• Cash: $20,000

• Accounts Receivable: $30,000

• Marketable Securities: $10,000

• Inventory: $40,000 (excluded!)

• Current Liabilities: $50,000

Step 1: Sum Up Liquid Assets

$$\text{Liquid Assets}=20,000+30,000+10,000=\mathrm{\$}60,000$$

Step 2: Apply Quick Ratio Formula

$$\text{Quick Ratio}=\frac{60,000}{50,000}=\mathbf{\text{1.2}}$$

Interpretation:

• 1.2 means the company has $1.20 in liquid assets for every $1 of short-term debt.

• Healthy (above 1.0), but compare to industry averages.

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3. How to Use a Quick Ratio Calculator

1. Enter Liquid Assets:

   • Cash ($20,000)

   • Accounts Receivable ($30,000)

   • Marketable Securities ($10,000)

2. Input Current Liabilities ($50,000).

3. Click "Calculate" → Result: 1.2

(Tip: Some calculators let you exclude prepaid expenses for even stricter analysis.)

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4. Quick Ratio vs. Current Ratio

Ratio	Includes Inventory?	Formula	Ideal Range
Quick Ratio	❌ No	$\frac{\text{Cash + AR + Securities}}{\text{Current Liabilities}}$	1.0 – 2.0
Current Ratio	✔ Yes	$\frac{\text{Current Assets}}{\text{Current Liabilities}}$	1.5 – 3.0

Why Exclude Inventory?

• Inventory isn’t always quickly convertible to cash (may be unsold or obsolete).

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5. Industry Benchmarks

Industry	Typical Quick Ratio
Retail	0.8 – 1.2
Manufacturing	1.0 – 1.5
Tech (SaaS)	1.2 – 2.0

(A ratio < 1.0 signals reliance on selling inventory or borrowing to cover debts.)

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6. Why the Quick Ratio Matters

✅ Safer Than Current Ratio – Focuses on immediately available funds.
✅ Creditors & Investors Love It – Shows financial resilience.
✅ Early Warning Sign – A declining trend may predict cash flow problems.

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7. Limitations

⚠ Ignores Timing – Some receivables may take 60+ days to collect.
⚠ Industry-Specific – Service firms (low inventory) naturally have higher ratios.

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8. How to Improve Your Quick Ratio

• Speed Up Receivables: Offer early-payment discounts.

• Build Cash Reserves: Reduce unnecessary expenses.

• Refinance Short-Term Debt: Convert to long-term loans.

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