How this calculator works
The quick ratio, also called the acid-test ratio, divides the most liquid current assets by current liabilities. Cash, marketable securities and receivables are counted because they can be converted to cash in a short time. Inventory and prepaid expenses are excluded, which is the difference from the current ratio. A quick ratio of 1 means quick assets cover current liabilities exactly. Below 1, the company depends on selling inventory or collecting receivables to meet short-term bills. The cash ratio shown alongside strips out receivables too and counts only cash and marketable securities.
Formula
Quick assets = cash + marketable securities + accounts receivable. Quick ratio = quick assets / current liabilities. Cash ratio = (cash + marketable securities) / current liabilities.
Worked example
A company holds $120,000 of cash, $80,000 of marketable securities and $150,000 of receivables, so quick assets are $350,000. With $350,000 of current liabilities the quick ratio is 1.00. The cash ratio is $200,000 / $350,000 = 0.5714.
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Frequently asked questions
How does the quick ratio differ from the current ratio?
The current ratio includes inventory and prepaid expenses. The quick ratio excludes them because inventory may take months to sell. A company can have a healthy current ratio and a weak quick ratio if inventory is large.
Is a higher quick ratio always better?
Up to a point. Very high quick assets can mean cash is sitting idle instead of being invested in the business. Compare with peers and with how quickly receivables are collected.
Should all receivables count?
Only those expected to be collected. If a large share is overdue or doubtful, use the net realisable amount after an allowance for credit losses.