Quick Ratio Calculator
Calculate the quick ratio (acid-test) from current assets, inventory and current liabilities — a strict test of short-term liquidity.
How it works
Quick ratio = (current assets − inventory) ÷ current liabilities
The quick ratio, or acid-test ratio, is a stricter cousin of the current ratio: it removes inventory from current assets before dividing by current liabilities. The logic is that inventory can be slow or difficult to convert to cash — a struggling business may not be able to sell it quickly or at full value — so a truly conservative liquidity test counts only cash, marketable securities and receivables. A quick ratio of 1 or more means a business can meet its short-term obligations from its most liquid assets alone, without selling a single unit of stock. It is especially telling for inventory-heavy businesses, where the current ratio can look reassuring while the quick ratio reveals a tighter reality.
Worked example
A company with $150,000 of current assets, $40,000 of which is inventory, and $100,000 of current liabilities has quick assets of 150,000 − 40,000 = $110,000. Its quick ratio is 110,000 ÷ 100,000 = 1.10 — its liquid assets alone cover its short-term bills with a little to spare.
Frequently asked questions
What is a good quick ratio?
A quick ratio of 1 or above is generally considered healthy — it means the most liquid assets cover current liabilities without relying on selling inventory. Below 1 does not necessarily spell trouble, but it means the business would need to move inventory or raise cash to cover a sudden call on its short-term obligations.
Why does the quick ratio exclude inventory?
Inventory is the least liquid current asset — it can take time to sell and may fetch less than its book value, especially under pressure. Excluding it gives a more conservative view of whether a business can pay its near-term bills using assets that are already cash or quickly become cash.
When should I use the quick ratio instead of the current ratio?
Use the quick ratio when inventory is a large share of current assets or is slow-moving, such as in manufacturing or certain retail. In those cases the current ratio can look comfortable while the quick ratio exposes a tighter liquidity position. Reviewing both together gives the fullest picture.
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Educational estimate, not financial advice.