Why is inventory excluded?

Inventory can be slow to sell and may fetch less than its book value in a hurry, so it is not treated as a quick asset.

What is a good quick ratio?

Around 1 or higher is generally considered safe, though norms differ by industry.

Why is it called the acid-test ratio?

The name comes from the acid test once used to check whether metal was real gold: it is a stricter test of liquidity than the current ratio.

Quick Ratio (Acid-Test) Formula

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Quick Ratio (Acid-Test) Calculator

The quick ratio, also called the acid-test ratio, measures whether a business could pay its current liabilities using only its most liquid assets: cash, marketable securities and accounts receivable. It deliberately leaves out inventory and prepaid expenses, because inventory may take months to sell, or sell only at a discount, and prepaid expenses cannot be turned back into cash.

Formula

Quick ratio = Cash + Marketable securities + Accounts receivableCurrent liabilities

Where

Cash: cash and cash equivalents
Marketable securities: short-term investments that can be sold quickly
Accounts receivable: amounts customers owe
Current liabilities: obligations due within a year

Calculator

Cash and equivalents

Marketable securities

Accounts receivable

Current liabilities

Result and step-by-step solution

Quick ratio

0.96

Without selling inventory the business could pay 96% of its current liabilities.

Quick assets
40,000.00 + 20,000.00 + 60,000.00 = 120,000.00
Divide by current liabilities
120,000.00125,000.00 = 0.96

How to use the formula

Some textbooks write the formula as (current assets − inventory − prepaid expenses) ÷ current liabilities. If current assets contain nothing else, the two versions give the same answer. Entering the components directly, as this calculator does, avoids accidentally counting other illiquid items.

In the example, 40,000 of cash, 20,000 of securities and 60,000 of receivables against 125,000 of current liabilities give a quick ratio of 0.96. The same company has a current ratio of 2.0, so half its current assets are tied up in stock. A quick ratio of 1 or more is usually read as comfortable. Businesses whose receivables are slow to collect should look at days sales outstanding as well.

Frequently asked questions

What is the quick ratio formula?: Quick ratio = (cash + marketable securities + accounts receivable) ÷ current liabilities.
Why is inventory excluded?: Inventory can be slow to sell and may fetch less than its book value in a hurry, so it is not treated as a quick asset.
What is a good quick ratio?: Around 1 or higher is generally considered safe, though norms differ by industry.
Why is it called the acid-test ratio?: The name comes from the acid test once used to check whether metal was real gold: it is a stricter test of liquidity than the current ratio.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.