Quick Ratio Calculator – Acid-Test Ratio Formula

A stricter liquidity test than the current ratio: can the business pay its short-term bills without selling any inventory?

Quick ratio formula

Quick ratio = (Cash + Marketable securities + Receivables) ÷ Current liabilities or equivalently Quick ratio = (Current assets − Inventory − Prepaid expenses) ÷ Current liabilities

Example

With cash of ₹5 lakh, receivables of ₹8 lakh and current liabilities of ₹11.5 lakh, the quick ratio is ₹13 lakh ÷ ₹11.5 lakh = 1.13. Including ₹6 lakh of inventory, the current ratio would be 1.65. The business can cover its short-term obligations without selling stock.

Why exclude inventory?

Inventory can take months to sell and may have to be discounted in a hurry. Prepaid expenses cannot be converted to cash at all. Removing them shows how well the company could cope if sales stopped suddenly. That is why it is called the "acid test".

Quick ratio vs current ratio

A large gap between the two ratios means the business depends heavily on inventory. That is normal for a retailer or manufacturer, but it deserves attention if stock is slow-moving or seasonal.

Frequently asked questions

What is a good quick ratio?

A quick ratio of 1 or higher is generally considered healthy. Many retail and manufacturing businesses operate safely at 0.5–1 because inventory turns quickly.

Are receivables always included?

Normally yes, but exclude debts that are doubtful or unlikely to be collected within the year for a more conservative figure.

Results are for planning and information only and are not accounting or financial advice. Check important figures with your accountant.