Quick Ratio Calculator

What is the Quick Ratio (Acid-Test Ratio)?

The Quick Ratio, also known as the Acid-Test Ratio, measures a company's ability to cover its short-term obligations using only its most liquid current assets. Unlike the broader current ratio, the quick ratio excludes illiquid assets such as inventory and prepaid expenses that cannot be immediately converted into cash.

Quick Ratio Formula

The Quick Ratio can be calculated using either of two standard approaches:

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

Or using current assets deduction:

$$\text{Quick Ratio} = \frac{\text{Current Assets} - \text{Inventory} - \text{Prepaid Expenses}}{\text{Current Liabilities}}$$

Interpreting Quick Ratio Results

• Quick Ratio > 1.0: The company possesses more than $1.00 of liquid assets for every $1.00 of short-term debt, indicating healthy short-term solvency.
• Quick Ratio = 1.0: Liquid assets exactly equal current liabilities.
• Quick Ratio < 1.0: The company relies on inventory sales or additional short-term financing to satisfy near-term liabilities, raising potential liquidity concerns.