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Quick Ratio (Acid-Test) Calculator

Calculate the quick ratio (acid-test ratio) — a stricter measure of short-term liquidity that excludes inventory and prepaid expenses from current assets.

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Results are for informational purposes only. Always verify with a qualified professional.

⚠️ Please fill in all required fields with valid numbers.

Everyday Uses

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Acid-test liquidity

Can you pay near-term bills without selling inventory? This ratio answers exactly that.

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Credit applications

Banks check the quick ratio — compute yours before applying.

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Cash crunch early warning

A ratio sliding below 1 signals trouble while there's still time to act.

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Vetting business partners

Check a customer's liquidity before extending them significant credit.

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Why stock is excluded

Inventory may take months to sell and may only sell at a discount under pressure. Removing it asks whether creditors could be paid without a fire sale.

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Where a low figure is normal

Restaurants and supermarkets run low quick ratios by design, because they take cash immediately and pay suppliers weeks later. A low number is not automatically a warning.

Frequently Asked Questions

What is the quick ratio formula?

Quick Ratio = (Current Assets − Inventory − Prepaid Expenses) ÷ Current Liabilities. It is also called the "acid-test ratio" because, like a chemical acid test, it strips away anything that cannot be quickly and reliably converted to cash, leaving only the most liquid assets: cash, marketable securities, and receivables.

Why exclude inventory from the quick ratio?

Inventory can take weeks or months to sell, and in a cash crunch it may only fetch a fraction of its book value through a fire sale. Excluding it gives a more conservative, realistic view of whether a company could cover its short-term liabilities right now without relying on selling stock.

What is a good quick ratio?

A quick ratio of 1.0 or higher generally means a company can cover its current liabilities without selling inventory or raising new financing. Below 1.0 isn't automatically alarming — it depends on the business model and how quickly receivables turn into cash — but it does mean any short-term cash crunch would need attention. Above 2.0 may suggest the company is sitting on excess idle assets that could be put to better use.

How is the quick ratio different from the current ratio?

The current ratio = Current Assets ÷ Current Liabilities, including inventory and prepaid expenses. The quick ratio is always equal to or lower than the current ratio because it removes the least liquid current assets. A large gap between the two ratios usually means a company is holding a lot of inventory relative to its other current assets — common in retail and manufacturing.

Why do retailers typically have lower quick ratios?

Retail and manufacturing businesses naturally carry large inventories as a core part of operations, which inflates the current ratio but is excluded from the quick ratio. A retailer with a quick ratio of 0.5 isn't necessarily in trouble — compare it against other retailers, not against a software company with almost no inventory at all.

How can a business improve its quick ratio?

Collect receivables faster (tighter credit terms, early-payment discounts), delay non-critical payables within agreed terms, convert excess cash-equivalent investments into more liquid forms, or pay down short-term debt with longer-term financing to shrink current liabilities relative to quick assets.