What is a good quick ratio?

A ratio of 1.0 means liquid assets exactly cover current liabilities, which is the minimum comfortable level for most industries. Ratios between 1.0 and 2.0 are generally considered healthy. Very high ratios (above 3.0) may suggest the company is holding too much idle cash instead of reinvesting it.

How is the quick ratio different from the current ratio?

The current ratio includes inventory and prepaid expenses in the numerator. The quick ratio excludes them, focusing only on assets that can be converted to cash quickly (typically within 90 days). The quick ratio is therefore a stricter, more conservative measure of short-term liquidity.

Why is inventory excluded from the quick ratio?

Inventory must first be sold and then collected before it becomes cash. In a crisis, inventory may take weeks or months to liquidate and may sell at a discount. Excluding it gives a clearer picture of assets immediately available to meet urgent obligations.

Can the quick ratio be too high?

Yes. A very high quick ratio may indicate the company is not deploying its cash productively — for example, not investing in growth or returning capital to shareholders. Context matters: capital-intensive industries naturally carry lower ratios, while software companies often show higher ones.

Where do I find these numbers?

All inputs come from the balance sheet (statement of financial position) in a company's financial statements. Cash and equivalents, short-term investments, and net receivables are listed under current assets; current liabilities are listed in the liabilities section of the same sheet.

Quick Ratio Calculator

Name: Quick Ratio Calculator
Availability: InStock
Author: Nham Vu

Calculate the quick ratio (acid-test ratio) to measure how well a company can cover short-term debts without selling inventory.

Balance Sheet Inputs

Enter values in the same currency (USD, EUR, etc.). Leave a field as 0 if it does not apply.

Cash & Cash Equivalents

Short-term Investments (marketable securities)

Accounts Receivable (net)

Current Liabilities (due within 1 year)

Interpretation Guide

Below 1.0 — Liquid assets may not cover current liabilities; potential short-term cash crunch.
1.0 – 2.0 — Healthy range for most industries; sufficient liquidity buffer.
Above 2.0 — Strong liquidity, but may indicate under-deployed cash or over-conservative management.

Summary

Calculate the quick ratio (acid-test ratio) to measure how well a company can cover short-term debts without selling inventory.

How it works

Enter the cash and cash equivalents balance from the balance sheet.
Enter short-term investments (marketable securities readily convertible to cash).
Enter net accounts receivable — amounts owed by customers.
Enter total current liabilities — all obligations due within one year.
The tool calculates Quick Ratio = (Cash + Short-term Investments + Receivables) / Current Liabilities.
Read the ratio and the interpretation: below 1.0 signals potential liquidity risk, 1.0–2.0 is healthy, above 2.0 may indicate idle cash.

Use cases

Assess whether a startup can meet payroll and bills without drawing on credit.
Compare liquidity across competitors in the same industry.
Evaluate a loan applicant's ability to service short-term debt.
Screen stocks: investors use the quick ratio to filter financially fragile companies.
Monitor quarter-over-quarter liquidity trends for a portfolio company.
Prepare for a bank covenant review that requires a minimum acid-test ratio.
Teach balance sheet analysis in a finance or accounting course.

Frequently Asked Questions

Last updated: 2026-06-11 · Reviewed by Nham Vu

Cash & Equivalents	—
+ Short-term Investments	—
+ Accounts Receivable	—
= Quick Assets (numerator)	—
÷ Current Liabilities	—
= Quick Ratio	—