Quick Ratio Calculator (Acid Test)
Calculate the quick ratio — the acid test of liquidity — measuring whether a business can meet short-term obligations without relying on selling inventory.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Quick Ratio Calculator (Acid Test) | — | Quick ratio = (cash + marketable securities + receivables) / current liabilities | ratio |
Step-by-Step Examples
Cash 80,000, securities 20,000, receivables 140,000, current liabilities 250,000.
- Quick assets = 80,000 + 20,000 + 140,000 = 240,000
- Quick ratio = 240,000 / 250,000 = 0.96
- Cash ratio = 100,000 / 250,000 = 0.40
Cash 15,000, no securities, receivables 210,000, current liabilities 180,000.
- Quick assets = 225,000
- Quick ratio = 225,000 / 180,000 = 1.25
- But receivables are 93% of quick assets
- Cash ratio = only 0.08
Cash 12,000, receivables 45,000, current liabilities 190,000.
- Quick assets = 57,000
- Quick ratio = 57,000 / 190,000 = 0.30
- Well below the 1.0 coverage threshold
Real-World Applications
Common Mistakes to Avoid
The entire point of the quick ratio is excluding inventory. Including it just reproduces the current ratio under a different name.
Receivables past 90 days often will not convert to cash on schedule. Ageing analysis should inform whether the full balance belongs in the calculation.
Businesses with fast inventory turnover and favourable payment terms can operate healthily below 1.0. Sector norms matter more than the round number.