Quick Ratio Calculator: Acid-Test Liquidity in Seconds

Is a quick ratio of 1.10 healthy?

On the defaults — $150,000.00 of current assets, $40,000.00 of inventory and $100,000.00 of current liabilities — the quick ratio is 1.10, the quick assets are $110,000.00, the current assets needed at the 1.00 bar are $140,000.00, and the most current liabilities the 1.00 bar allows are $110,000.00. The quick ratio — also called the acid-test ratio — is (current assets − inventory) ÷ current liabilities, all measured at the same date. Quick assets are what the business can turn into cash fast — cash, accounts receivable and short-term investments. Inventory is left out because it can take months to sell and may have to be discounted. A ratio of 1.00 means the business holds exactly $1.00 of quick assets for every $1.00 of short-term bills. Below 1.00 the business is leaning on selling inventory to pay its bills. Above 2.00 the business may be sitting on idle cash it could put to work. Lenders watch it alongside the current ratio before extending credit.

Five things about the model are worth stating plainly. First, the quick assets are the current assets minus the inventory — $150,000.00 − $40,000.00 = $110,000.00. Second, the quick ratio is the quick assets divided by the current liabilities — $110,000.00 ÷ $100,000.00 = 1.10. Third, the current assets needed at the target are the target times the current liabilities plus the inventory — 1.00 × $100,000.00 + $40,000.00 = $140,000.00. Fourth, the most current liabilities allowed at the target are the quick assets divided by the target — $110,000.00 ÷ 1.00 = $110,000.00. And fifth, the current ratio on the same numbers is 1.50 — the $40,000.00 of inventory is the whole gap between the two ratios; all listed in Accuracy & limitations.

The worked example, line by line

Setup: $150,000.00 of current assets, $40,000.00 of inventory, $100,000.00 of current liabilities, target ratio 1.00.

Line 1 — the quick assets. The quick assets are $150,000.00 − $40,000.00 = $110,000.00.

Line 2 — the quick ratio. The quick ratio is $110,000.00 ÷ $100,000.00 = 1.10.

Line 3 — the current assets needed. The current assets needed at the 1.00 bar are 1.00 × $100,000.00 + $40,000.00 = $140,000.00.

Line 4 — the most current liabilities allowed. The most current liabilities the 1.00 bar allows are $110,000.00 ÷ 1.00 = $110,000.00.

Line 5 — the comparison. The current ratio on the same numbers is $150,000.00 ÷ $100,000.00 = 1.50 — the $40,000.00 of inventory is the whole gap between the two ratios.

Line 6 — the check. 1.10 × $100,000.00 = $110,000.00, the quick assets; and $110,000.00 + $40,000.00 = $150,000.00, the current assets.

Every branch, checked

Inventory $0: Quick ratio 1.50; quick assets $150,000.00; current assets needed at the 1.00 bar $100,000.00; most current liabilities allowed at the 1.00 bar $150,000.00; current ratio 1.50 — With no inventory the quick assets are the whole $150,000.00, so the quick ratio equals the current ratio at 1.50 — there is nothing to strip out.

Inventory $80,000: Quick ratio 0.70; quick assets $70,000.00; current assets needed at the 1.00 bar $180,000.00; most current liabilities allowed at the 1.00 bar $70,000.00; current ratio 1.50 — With $80,000.00 of inventory the quick assets fall to $70,000.00 and the ratio falls to 0.70 — below 1.00, so the business is leaning on selling inventory to pay its bills.

Current liabilities $50,000: Quick ratio 2.20; quick assets $110,000.00; current assets needed at the 1.00 bar $90,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; current ratio 3.00 — Halving the current liabilities to $50,000.00 doubles the ratio to 2.20 — the business holds $2.20 of quick assets for every $1.00 of short-term bills, and may be sitting on idle cash.

Current assets $200,000, inventory $40,000: Quick ratio 1.60; quick assets $160,000.00; current assets needed at the 1.00 bar $140,000.00; most current liabilities allowed at the 1.00 bar $160,000.00; current ratio 2.00 — With $200,000.00 of current assets the quick assets rise to $160,000.00 and the ratio rises to 1.60 — comfortably above the 1.00 bar.

Current liabilities $150,000: Quick ratio 0.73; quick assets $110,000.00; current assets needed at the 1.00 bar $190,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; current ratio 1.00 — With current liabilities of $150,000.00 the ratio is 0.73 — the unrounded ratio is 0.733333 — so the business holds only $0.73 of quick assets for every $1.00 of short-term bills.

Inventory $110,000: Quick ratio 0.40; quick assets $40,000.00; current assets needed at the 1.00 bar $210,000.00; most current liabilities allowed at the 1.00 bar $40,000.00; current ratio 1.50 — With $110,000.00 of inventory the quick assets fall to $40,000.00 and the ratio falls to 0.40 — most of the short-term assets are stock on a shelf, not cash in the bank.

Current assets $120,000, inventory $20,000: Quick ratio 1.00; quick assets $100,000.00; current assets needed at the 1.00 bar $120,000.00; most current liabilities allowed at the 1.00 bar $100,000.00; current ratio 1.20 — With $120,000.00 of current assets and $20,000.00 of inventory the quick assets are exactly $100,000.00 and the ratio is exactly 1.00 — the business holds exactly $1.00 of quick assets for every $1.00 of short-term bills.

The reverses, worked backwards

Smallest whole-dollar current assets for the ratio to reach 1.00: At the displayed $140,000 the figures are Quick ratio 1.00; quick assets $100,000.00; current assets needed at the 1.00 bar $140,000.00; most current liabilities allowed at the 1.00 bar $100,000.00; current ratio 1.40. At the displayed $140,000 the quick ratio is 1.00. At $139,999 the unrounded ratio is 0.999990 — it shows as 1.00 only after rounding, and it is still below the 1.00 line, so $140,000 is the smallest whole-dollar current assets that reaches the bar.

Smallest whole-dollar current assets for the ratio to reach 1.50: At the displayed $190,000 the figures are Quick ratio 1.50; quick assets $150,000.00; current assets needed at the 1.50 bar $190,000.00; most current liabilities allowed at the 1.50 bar $100,000.00; current ratio 1.90. At the displayed $190,000 the quick ratio is 1.50. At $189,999 the unrounded ratio is 1.499990 — it shows as 1.50 only after rounding, and it is still below the 1.50 line, so $190,000 is the smallest whole-dollar current assets that reaches 1.50.

Largest whole-dollar inventory for the ratio to STAY at or above 1.00: At the displayed $50,000 the figures are Quick ratio 1.00; quick assets $100,000.00; current assets needed at the 1.00 bar $150,000.00; most current liabilities allowed at the 1.00 bar $100,000.00; current ratio 1.50. At the displayed $50,000 the quick ratio is 1.00. At $50,001 the unrounded ratio is 0.999990 — it shows as 1.00 only after rounding, and it is still below the 1.00 line, so $50,000 is the largest whole-dollar inventory for the ratio to stay at or above the bar.

Largest whole-dollar current liabilities for the ratio to STAY at or above 1.00: At the displayed $110,000 the figures are Quick ratio 1.00; quick assets $110,000.00; current assets needed at the 1.00 bar $150,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; current ratio 1.36. At the displayed $110,000 the quick ratio is 1.00. At $110,001 the unrounded ratio is 0.999991 — it shows as 1.00 only after rounding, and it is still below the 1.00 line, so $110,000 is the largest whole-dollar current liabilities for the ratio to stay at or above the bar.

Smallest whole-dollar current assets for the ratio to reach 1.25: At the displayed $165,000 the figures are Quick ratio 1.25; quick assets $125,000.00; current assets needed at the 1.25 bar $165,000.00; most current liabilities allowed at the 1.25 bar $100,000.00; current ratio 1.65. At the displayed $165,000 the quick ratio is 1.25. At $164,999 the unrounded ratio is 1.249990 — it shows as 1.25 only after rounding, and it is still below the 1.25 line, so $165,000 is the smallest whole-dollar current assets that reaches 1.25.

Largest whole-dollar inventory for the ratio to STAY at or above 1.50: At the displayed $50,000 the figures are Quick ratio 1.50; quick assets $150,000.00; current assets needed at the 1.50 bar $200,000.00; most current liabilities allowed at the 1.50 bar $100,000.00; current ratio 2.00. At the displayed $50,000 the quick ratio is 1.50. At $50,001 the unrounded ratio is 1.499990 — it shows as 1.50 only after rounding, and it is still below the 1.50 line, so $50,000 is the largest whole-dollar inventory for the ratio to stay at or above 1.50.

A warning about the neighbours: every neighbour above shows as the target when rounded to two decimals, but its unrounded ratio is short of the target. A lender underwriting on the unrounded ratio would still say no. The page prints the unrounded neighbour value in full so the rounding does not mislead you.

What the defaults assume

The defaults are $150,000.00 of current assets, $40,000.00 of inventory, $100,000.00 of current liabilities and a target ratio of 1.00 — Quick ratio 1.10; quick assets $110,000.00; current assets needed at the 1.00 bar $140,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; current ratio 1.50. With Inventory $0, Quick ratio 1.50; quick assets $150,000.00; current assets needed at the 1.00 bar $100,000.00; most current liabilities allowed at the 1.00 bar $150,000.00; current ratio 1.50. With Inventory $80,000, Quick ratio 0.70; quick assets $70,000.00; current assets needed at the 1.00 bar $180,000.00; most current liabilities allowed at the 1.00 bar $70,000.00; current ratio 1.50. With Current liabilities $50,000, Quick ratio 2.20; quick assets $110,000.00; current assets needed at the 1.00 bar $90,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; current ratio 3.00. With Current assets $200,000, inventory $40,000, Quick ratio 1.60; quick assets $160,000.00; current assets needed at the 1.00 bar $140,000.00; most current liabilities allowed at the 1.00 bar $160,000.00; current ratio 2.00. With Current liabilities $150,000, Quick ratio 0.73; quick assets $110,000.00; current assets needed at the 1.00 bar $190,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; current ratio 1.00 — the unrounded ratio is 0.733333, which rounds half-up to 0.73. With Inventory $110,000, Quick ratio 0.40; quick assets $40,000.00; current assets needed at the 1.00 bar $210,000.00; most current liabilities allowed at the 1.00 bar $40,000.00; current ratio 1.50. With Current assets $120,000, inventory $20,000, Quick ratio 1.00; quick assets $100,000.00; current assets needed at the 1.00 bar $120,000.00; most current liabilities allowed at the 1.00 bar $100,000.00; current ratio 1.20. With Inventory $150,000 (equals current assets), Quick ratio 0.00; quick assets $0.00; current assets needed at the 1.00 bar $250,000.00; most current liabilities allowed at the 1.00 bar $0.00; current ratio 1.50. With Current liabilities $0, Quick ratio — (undefined: no short-term bills to cover); quick assets $110,000.00; current assets needed at the 1.00 bar $40,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; current ratio — — the ratio cannot be computed, never Infinity or NaN. With Current assets $250,000, inventory $40,000, Quick ratio 2.10; quick assets $210,000.00; current assets needed at the 1.00 bar $140,000.00; most current liabilities allowed at the 1.00 bar $210,000.00; current ratio 2.50. With Current assets $62,500, inventory $12,500, Quick ratio 0.50; quick assets $50,000.00; current assets needed at the 1.00 bar $112,500.00; most current liabilities allowed at the 1.00 bar $50,000.00; current ratio 0.63. With Current assets $100,000, inventory $33,333, Quick ratio 0.67; quick assets $66,667.00; current assets needed at the 1.00 bar $133,333.00; most current liabilities allowed at the 1.00 bar $66,667.00; current ratio 1.00 — the unrounded ratio is 0.66667, which rounds half-up to 0.67. With Current assets $123,456, inventory $23,456, current liabilities $98,765, Quick ratio 1.01; quick assets $100,000.00; current assets needed at the 1.00 bar $122,221.00; most current liabilities allowed at the 1.00 bar $100,000.00; current ratio 1.25 — the unrounded ratio is 1.012504, shown as 1.01, just over 1.01. With Target bars — current assets $150,000, inventory $40,000, current liabilities $100,000, Current assets needed at the 1.00 bar $140,000.00; at the 1.50 bar $190,000.00; most current liabilities allowed at the 1.00 bar $110,000.00; at the 1.50 bar $73,333.33.

Output · formula · meaning

Who uses this

• The small-business owner checking the year-end balance sheet: they learn $150,000.00 of current assets minus $40,000.00 of inventory is $110,000.00 of quick assets, a ratio of 1.10 — and they check the $140,000 reverse to see the smallest assets that reach the 1.00 bar.
• The supplier deciding whether to extend 30-day terms: they learn a ratio of 1.00 means exactly $1.00 of quick assets for every $1.00 of short-term bills — and they check the $50,000 reverse to see the largest inventory that stays at or above the bar.
• The owner whose ratio slipped to 0.70: they learn the business is leaning on selling inventory to pay its bills — and they check the $140,000 reverse to see the assets that would bring it back to 1.00.
• The founder with a 2.20 ratio: they learn the business may be sitting on idle cash — and they check the $110,000 reverse to see the largest liabilities that keep the ratio at or above 1.00.

Accuracy & limitations

The math is first-principles: the quick ratio is the current assets minus the inventory, divided by the current liabilities, rounded to two decimals half-up; the quick assets are the current assets minus the inventory, rounded to cents half-up; the current assets needed at the bar are the bar times the current liabilities plus the inventory; the most current liabilities allowed at the bar are the quick assets divided by the bar; the current ratio for comparison is the current assets divided by the current liabilities. The reverses are judged on the UNROUNDED ratio: a neighbour one dollar short shows as the target when rounded to two decimals, but its unrounded ratio is below the target, so it does not meet the bar — the page prints the unrounded neighbour value in full. What the model cannot do is judge the business: quick assets are what the business can turn into cash fast — cash, accounts receivable and short-term investments — and a lender or supplier will check how much of the receivables really gets paid; the 1.00 bar is the usual line, not a rule, and some industries run happily below it; and the ratio says nothing about the long-term debt, the cash flow, or whether the business is profitable. Use it to see whether the short-term bills are covered without selling inventory — then read the rest of the balance sheet.

Frequently asked questions