Quick Ratio (Acid Test) Calculator
Calculate the quick ratio, a strict liquidity test that excludes inventory from current assets.
Results
What is it?
The quick ratio (acid test) is a stricter liquidity measure than the current ratio. It excludes inventory (which may be slow to convert to cash) and prepaid expenses, measuring whether a company can meet short-term obligations with only its most liquid assets.
How to use
Enter cash and equivalents, short-term investments, and accounts receivable (all highly liquid assets). Enter total current liabilities. The quick ratio = (Cash + Short-term Investments + AR) / Current Liabilities.
Example scenario
Cash $100k, short-term investments $50k, AR $150k = quick assets $300k. Current liabilities $200k. Quick ratio = 1.5x. The company can comfortably meet obligations without selling inventory.
Pro tip
A quick ratio above 1.0 is generally healthy. Manufacturing and retail businesses often have lower quick ratios due to large inventories. Technology and service businesses typically have higher quick ratios. A sudden drop in quick ratio warrants investigation into receivables aging or cash burn.