This quick ratio calculator runs the acid test: only assets that convert to cash fast — cash, marketable securities and receivables — divided by current liabilities. Inventory doesn’t count.

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The Acid Test: Liquidity Without the Inventory Story

The lenient version is our Current Ratio Calculator. Part of our Finance Calculators collection.

Worked Example (Verified)

  • CA $250k − inventory $80k − prepaids $10k = $160k quick assets / CL $100k (defaults) = 1.60 — passes comfortably, while the current ratio of 2.50 flatters it by counting the warehouse
  • The test’s premise: in a crunch, inventory sells slowly and at a discount, prepaids never convert back to cash at all — receivables and cash are what actually pay bills this quarter
  • Software/service firms often show quick ≈ current (no inventory); retailers show a canyon between them — the acid test was invented for the second kind

Ratio Discipline

  • Receivables quality hides inside “quick”: 90-day-overdue receivables are quick in name only — age them before trusting the ratio.
  • Seasonal inventory builds temporarily crush the quick ratio at exactly the healthy moment (pre-holiday stocking) — context, again.
  • Banks write quick-ratio covenants into loans (often ≥ 1.0) — compute it the way your credit agreement defines it.
  • The ratio says nothing about WHEN liabilities land vs when receivables land; a 30-day mismatch can sink a “passing” firm.

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Frequently Asked Questions

How do you calculate the quick ratio?

Quick ratio = (current assets − inventory − prepaid expenses) ÷ current liabilities. Defaults: ($250,000 − $80,000 − $10,000) ÷ $100,000 = 1.60. Only near-cash assets count: cash, marketable securities and receivables.

What is a good quick ratio?

≥ 1.0 is the classic pass — liquid assets alone could pay every short-term bill today. Many healthy firms operate at 0.7–1.0 with dependable collection cycles; persistently below ~0.5 signals real liquidity dependence on inventory sales.

Why is inventory excluded?

Because converting inventory to cash requires finding a buyer, usually at a markdown, on an uncertain timeline — precisely what a liquidity crisis doesn’t offer. Prepaids are excluded because they’re spent value (insurance already bought), not convertible assets.

Quick ratio vs current ratio — which matters more?

Depends on inventory reliability. For service firms they’re nearly identical; for inventory-heavy firms the quick ratio is the stress test and the current ratio the brochure. Lenders weight the quick; read both and mind the spread.

Can a company pass the quick test and still fail?

Yes — receivables can be uncollectible, liabilities can cluster earlier than collections, and ratios are snapshots of stocks, not flows. The acid test screens one risk (asset liquidity) honestly and ignores others (timing, quality, credit access).

Is this quick ratio calculator free?

Yes — free, instant, no sign-up.