What this calculator does
The quick ratio, also called the acid-test ratio, is a stricter measure of short-term liquidity than the current ratio. It asks whether a business could cover its current liabilities using only its most easily converted assets, cash, receivables and similar, without relying on selling inventory first.
This quick ratio calculator takes current assets, inventory and prepaid expenses (both excluded from the numerator) and current liabilities, and returns the ratio along with a plain-language read on whether it sits at a comfortable, adequate or weak level.
The formula
The quick ratio starts from current assets and strips out the two components that are not readily convertible to cash: inventory, which needs to be sold first, and prepaid expenses, which have already been spent and cannot be turned back into cash. What remains, the "quick assets", is divided by current liabilities.
| Term | Meaning |
|---|---|
| Current assets | Assets expected to be converted to cash or used within a year: cash, receivables, inventory and similar. |
| Inventory | Goods held for sale; excluded from quick assets because it must be sold, and possibly discounted, before becoming cash. |
| Prepaid expenses | Amounts already paid for future goods or services, such as prepaid rent or insurance; excluded because they cannot be converted back to cash. |
| Current liabilities | Obligations due within a year: accounts payable, short-term debt and similar. |
The inputs explained
| Field | What to enter |
|---|---|
| Current assets ($) | Total current assets from the balance sheet. |
| Inventory ($) | Inventory value, subtracted from current assets. |
| Prepaid expenses ($) | Prepaid expenses, also subtracted from current assets. |
| Current liabilities ($) | Total current liabilities. |
When to use it
Checking a business can meet short-term obligations without selling stock
A retailer or manufacturer holding large inventory might show a healthy current ratio but a much weaker quick ratio, since the inventory cannot be sold and turned into cash overnight.
Comparing liquidity across businesses in different industries
The quick ratio is more comparable across industries with different inventory levels than the current ratio, since it strips inventory out of the comparison entirely.
Assessing a loan application or credit line request
A lender reviewing a company's short-term liquidity often looks at the quick ratio specifically, since it shows coverage without assuming inventory can be liquidated quickly.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
Quick ratio across different levels of current liabilities
Fixed current assets, inventory and prepaid expenses, with current liabilities varied to show how the ratio changes.
| Current liabilities | Quick ratio | Assessment |
|---|---|---|
| $150,000 | 2.07 | Strong: liquid assets comfortably exceed current liabilities |
| $200,000 | 1.55 | Strong: liquid assets comfortably exceed current liabilities |
| $250,000 | 1.24 | Adequate: liquid assets alone cover current liabilities |
| $300,000 | 1.03 | Adequate: liquid assets alone cover current liabilities |
| $400,000 | 0.78 | Weak: liquid assets fall short of current liabilities without selling inventory |
| $500,000 | 0.62 | Weak: liquid assets fall short of current liabilities without selling inventory |
Quick ratio across different inventory levels
Fixed current assets, prepaid expenses and current liabilities, with inventory varied to show its effect on the ratio.
| Inventory | Quick ratio | Assessment |
|---|---|---|
| $0 | 1.43 | Adequate: liquid assets alone cover current liabilities |
| $50,000 | 1.27 | Adequate: liquid assets alone cover current liabilities |
| $100,000 | 1.10 | Adequate: liquid assets alone cover current liabilities |
| $150,000 | 0.93 | Weak: liquid assets fall short of current liabilities without selling inventory |
| $200,000 | 0.77 | Weak: liquid assets fall short of current liabilities without selling inventory |
| $250,000 | 0.60 | Weak: liquid assets fall short of current liabilities without selling inventory |
Questions
What is a good quick ratio?
A quick ratio of 1.0 or above generally means a business can cover its current liabilities without selling inventory. Above 1.5 is comfortable; below 1.0 means liquid assets alone fall short, which is not necessarily fatal but worth watching.
What is the difference between the quick ratio and the current ratio?
The current ratio divides all current assets by current liabilities. The quick ratio removes inventory and prepaid expenses first, giving a stricter view that does not assume inventory can be sold quickly.
Why is it also called the acid-test ratio?
The name comes from a historical "acid test" for gold, a quick, decisive check. Applied to a balance sheet, it is a quick, decisive check of whether a business could meet its near-term obligations using only its most liquid assets.
Can a quick ratio be too high?
A very high quick ratio can mean a business is holding excess cash or receivables rather than investing it productively. As with most ratios, context (industry norms, growth stage) matters more than the number in isolation.
For the quick ratio alongside the current and cash ratio in one view, see the liquidity ratios calculator. For a company's debt-related ratios instead, see the leverage and solvency ratios calculator.