Liquidity Ratios Calculator: Current, Quick & Cash Ratios

How the three ratios work

All three ratios divide something by current liabilities — the bills due within a year — and the only difference is what goes on top. The current ratio puts all current assets on top: $480,000 ÷ $240,000 is 2.00, which means the business holds $2.00 of short-term assets for every $1.00 due. The quick ratio puts only the assets that turn into cash fast on top: current assets minus inventory ($120,000) minus prepaid expenses ($24,000) is $336,000, and $336,000 ÷ $240,000 is 1.40. The cash ratio puts only cash and equivalents on top: $60,000 ÷ $240,000 is 0.25, or 25 cents of cash for every dollar due. The three together tell you how much of the headline survives contact with reality: 2.00 becomes 1.40 when the stock is stripped out, and 0.25 when only the cash counts.

The worked example, line by line

Setup: current assets $480,000, current liabilities $240,000, inventory $120,000, prepaid expenses $24,000, cash and equivalents $60,000.

Line 1 — current ratio. $480,000 ÷ $240,000 = 2.00. The rule of thumb says 2.0 or more is strong, 1.5–2.0 is healthy, 1.0–1.5 is thin, and under 1.0 is trouble — so 2.00 is strong.

Line 2 — quick ratio. $480,000 − $120,000 − $24,000 = $336,000 of quick assets, and $336,000 ÷ $240,000 = 1.40. The rule of thumb says 1.0 or more is healthy, 0.5–1.0 is watch, and under 0.5 is weak — so 1.40 is healthy.

Line 3 — cash ratio. $60,000 ÷ $240,000 = 0.25. The rule of thumb says 0.2 or more is adequate, 0.1–0.2 is thin, and under 0.1 is weak — so 0.25 is adequate.

Branch — the inventory-heavy retailer: current assets $600,000, liabilities $300,000, inventory $300,000, prepaid $12,000, cash $30,000. Current is 600,000 ÷ 300,000 = 2.00 — the same headline as the default — but quick is (600,000 − 300,000 − 12,000) ÷ 300,000 = 0.96 and cash is 30,000 ÷ 300,000 = 0.10. Half the assets are stock on shelves, and the quick ratio shows it.

Branch — the SaaS business: current assets $400,000, liabilities $200,000, no inventory, prepaid $40,000, cash $150,000. Current is 400,000 ÷ 200,000 = 2.00 again, quick is (400,000 − 0 − 40,000) ÷ 200,000 = 1.80, and cash is 150,000 ÷ 200,000 = 0.75. The same current ratio as the retailer, but three quarters of every dollar due is sitting in cash.

Branch — the stressed business: current assets $220,000, liabilities $275,000, inventory $88,000, prepaid $11,000, cash $22,000. Current is 220,000 ÷ 275,000 = 0.80, quick is (220,000 − 88,000 − 11,000) ÷ 275,000 = 0.44, and cash is 22,000 ÷ 275,000 = 0.08. Liabilities exceed assets, and only 8 cents of cash covers each dollar due — this business needs a loan, a sale, or a payment plan.

Branch — the seasonal build-up: current assets $600,000, liabilities $360,000, inventory $240,000, prepaid $24,000, cash $60,000. Current is 600,000 ÷ 360,000 = 1.67, quick is (600,000 − 240,000 − 24,000) ÷ 360,000 = 0.93, and cash is 60,000 ÷ 360,000 = 0.17. Healthy on the headline, thin once the stock is stripped out — exactly what a retailer looks like before the holiday season, and exactly why the quick ratio exists.

Interpretation bands — rules of thumb

These bands are rules of thumb, not law, and they vary by industry: a supermarket turns stock over in days, so a current ratio of 1.2 can be fine, while a manufacturer that holds months of parts needs a higher one. Compare a business against its own past ratios and its industry peers, not against a single number.

Output · formula · meaning

Who uses this

• The small-business owner: reads $480,000 of current assets against $240,000 due and learns the current ratio is 2.00 (strong) — but the quick ratio of 1.40 and the cash ratio of 0.25 show how much of that strength is stock, not money.
• The lender checking a borrower: sees a current ratio of 2.00 and then the retailer's quick ratio of 0.96 — the headline is strong, but half the assets are inventory that may not sell, so the loan terms tighten.
• The investor comparing two stocks: sees the same current ratio of 2.00 at a retailer and a SaaS business, then the quick ratios — 0.96 against 1.80 — and learns the SaaS business is far more liquid for the same headline number.
• The owner in trouble: enters $220,000 of assets against $275,000 due and learns the current ratio is 0.80, the quick ratio 0.44, and the cash ratio 0.08 — liabilities exceed assets, and the business needs a plan before the next bill lands.

Accuracy & limitations

The math is exact for the five numbers you enter, but the ratios are only as good as the balance sheet they come from. All five inputs must come from the same balance-sheet date — mixing this year's assets with last year's liabilities gives a ratio that means nothing. The bands are rules of thumb and vary by industry: supermarkets run low current ratios because stock turns over in days, while manufacturers and retailers that hold months of inventory need higher ones, and a seasonal business looks thin before its selling season and flush after it. The ratios also ignore timing — a current ratio of 2.00 does not help if the receivables are due in 90 days and the payables are due next week — and they ignore quality: receivables that will never be collected still count as assets. The quick ratio removes inventory and prepaid expenses, but some analysts also remove receivables, which gives the stricter cash ratio shown here. These ratios describe liquidity, not profitability or solvency — a business can be liquid and unprofitable, or profitable and unable to pay its bills. This is an educational tool, not financial advice.