Quick Ratio (Acid Test)

(Current assets − Inventory) / Current liabilities. Stricter than current ratio.

Inputs

Result

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How to use this calculator

  • From balance sheet: subtract inventory + prepaid from current assets.
  • Divide by current liabilities.

About this calculator

Quick ratio (acid test): more conservative liquidity measure than current ratio. Excludes inventory (slow to convert to cash, may need discount) and prepaid expenses (no cash value). Quick > 1 = can pay current obligations from liquid assets alone. Retail and manufacturing typically run 0.5-1.0 (lots of inventory); tech and services run 1.5-3.0 (cash-rich).

Frequently asked

Why exclude inventory?+
Inventory takes time to sell and may require discounting. Cash, AR, and short-term investments are "quick" to convert.
Why exclude prepaid?+
Prepaid (rent, insurance) won't generate cash — it's already-paid expense. Doesn't help meet obligations.
Below 1 always bad?+
No — service companies + grocery chains routinely run 0.5-0.8. What matters: can they cover obligations from cash + AR?
Quick vs. cash ratio?+
Cash ratio = (cash + securities) / CL. Even stricter (excludes AR). Use for crisis-stress test.
Industry-specific norms?+
Heavy industry: 0.5-1.0. SaaS: 2-4. Bank: not relevant (different metrics).

Related calculators

Current Ratio
Current ratio = Current Assets / Current Liabilities. Liquidity benchmark.
Debt-to-Equity Ratio
D/E = Total Debt / Total Equity. Leverage relative to ownership.
Return on Equity (ROE)
ROE = Net Income / Avg Shareholders' Equity. Profitability per dollar of equity.
Return on Assets (ROA)
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EBITDA Calculator
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Free Cash Flow (FCF)
FCF = EBIT(1−T) + D&A − CapEx − ΔNWC. Cash available to all capital providers.

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