Measure liquidity the strict way — the quick ratio covers short-term liabilities with only the most liquid assets, leaving out inventory.
Quick ratio = (cash + receivables) ÷ current liabilities. It excludes inventory and prepaid expenses because they can't reliably be turned into cash quickly. A ratio of 1 or more means the business can meet short-term obligations without selling inventory. General information only.
The quick ratio — the "acid test" — is the current ratio's tougher sibling. It counts only assets you could turn to cash almost immediately (cash and receivables), leaving out inventory that might take months to sell. A value of 1 or more means the business can pay its near-term bills without relying on selling stock.
Quick ratio = (cash + receivables) ÷ current liabilities
Because it isn't always quickly or fully convertible to cash — it can be slow-moving, discounted, or obsolete. Leaving it out gives a more conservative liquidity picture.
Around 1 or higher is generally healthy, but it varies by industry. Retailers with fast inventory turns can run lower; service businesses often run higher.
Related: current ratio calculator · debt-to-equity calculator · inventory turnover calculator · all free calculators.
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