What is a good Quick Ratio?

A Quick Ratio of 1.0 or greater is considered ideal. A ratio of 1.0 means the business possesses exactly $1.00 of liquid quick assets to cover every $1.00 of immediate short-term obligations without needing to liquidate inventory.

Why does the Quick Ratio exclude inventory?

Inventory is excluded because it cannot be converted into cash immediately. Liquidating inventory quickly often requires steep discounts or write-downs, making it an unreliable asset for emergency short-term debt repayments.

Working Capital & Liquidity Health

Quick Ratio Calculator

Compute the acid-test ratio, current ratio, cash coverage multiplier, and net working capital cushion by isolating pure liquid assets from illiquid inventory.

Balance Sheet Current Accounts

Quick Assets (Immediate Liquidity)Sum: $270,000

Cash & Equivalents ($)

Marketable Securities ($)

Accounts Receivable ($)

Excluded from Acid-Test (Illiquid Assets)

Merchandise Inventory ($)

Prepaid Expenses ($)

Total Current Liabilities ($)Includes trade payables, short-term debt, and accrued payroll.

Optimal Liquidity (Ideal Range)

Quick Ratio (Acid-Test)

1.54x

$1.54 liquid cash per $1.00 debt

Current Ratio (Total)

2.31x

including inventory & prepaids

Cash Ratio (Pure Cash)

1.00x

$175,000 cash reserves

Net Working Capital

$230,000

Current Assets - Liabilities

Acid-Test Verdict: Excellent liquidity. Cash and receivables comfortably cover all upcoming vendor, payroll, and debt maturities.

Quick Ratio vs. Current Ratio Formula Guide

Quick Ratio (Acid-Test) Formula

Quick Ratio = (Cash + Marketable Securities + Receivables) ÷ Current Liabilities

Unlike the Current Ratio, this formula strips away inventory and prepaid expenses because inventory cannot be reliably turned into liquid cash during sudden liquidity shocks.

Liquidity Hierarchy

• Cash Ratio: Strictest liquidity test. Measures pure cash against immediate obligations.
• Quick Ratio: Best standard for B2B services, SaaS, and consultancies with verifiable AR receivables.
• Current Ratio: Broader balance sheet cushion for manufacturing and retail holding active merchandise inventory.

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