Quick Ratio (Acid-Test) Calculator
Measure whether a firm can cover its short-term liabilities from liquid assets alone, without selling inventory. Computes the quick ratio (acid-test ratio) from four balance-sheet figures.
Quick ratio
0.63
- Quick assets
- £91,063,000,000.00
- Net quick position
- -£54,245,000,000.00
- Current liabilities
- £145,308,000,000.00
A quick ratio between 0.5 and 1.0 is common and often perfectly healthy, but it means the firm cannot cover all its current liabilities from liquid assets alone — it is leaning on inventory turnover, supplier credit, or incoming sales to close the gap. That is normal for retail and hospitality, where stock sells fast and payables run long. Outside those models, compare against sector peers and watch whether the ratio is stable or slipping.
How to use this calculator
Pull four figures from the most recent balance sheet. Three make up the "quick assets" numerator: cash and cash equivalents, short-term marketable securities (short-term investments), and trade accounts receivable, net. The fourth is total current liabilities (accounts payable, accrued expenses, short-term borrowings, the current portion of long-term debt, deferred revenue due within twelve months). The calculator sums the three quick assets and divides by current liabilities. Inventory and prepaid expenses are deliberately left out — that exclusion is the whole point of the acid test. Defaults use Apple’s fiscal 2023 balance sheet (cash $29.965B, marketable securities $31.590B, receivables $29.508B, current liabilities $145.308B) for a quick ratio of 0.627.
How the calculation works
The quick ratio, or acid-test ratio, is the stricter sibling of the current ratio. Both ask whether a firm can meet the liabilities falling due within twelve months, but the quick ratio only counts assets that can be turned into cash quickly without selling stock: cash, marketable securities, and receivables. It strips out inventory (which may not sell at book value) and prepaid expenses (which cannot be converted to cash at all). A ratio of 1.0 or more means liquid assets fully cover current liabilities; below 1.0 means the firm relies on shifting inventory, collecting receivables, or fresh finance to bridge the gap. Because it ignores inventory, the quick ratio is the more revealing metric for businesses whose stock is slow-moving, seasonal, or prone to obsolescence — and it pairs naturally with the current ratio, which includes that inventory.
Worked example
Apple’s fiscal 2023 (ended Sep 30, 2023) 10-K reported cash and cash equivalents of $29.965B, short-term marketable securities of $31.590B, and accounts receivable of $29.508B — quick assets of $91.063B. Total current liabilities were $145.308B. Quick ratio = 91.063 / 145.308 = 0.627. Contrast that with Apple’s current ratio of 0.988 for the same period (which adds inventory of $6.331B, vendor non-trade receivables of $31.477B, and other current assets): stripping those out drops the reading from just under 1.0 to about 0.63. The gap shows how much of Apple’s current-asset base sits in non-quick lines. As with the current ratio, a sub-1.0 reading is normal for Apple given its scale, brand strength, and fast receivables turn — the trend across periods matters more than the level in any single quarter.
Frequently asked questions
What is a good quick ratio?
A quick ratio of 1.0 is the classic benchmark: liquid assets exactly cover current liabilities. Above 1.0 is comfortable; a reading well above ~2.0 can suggest idle cash or stretched receivables rather than strength. Below 1.0 is very common and not automatically a problem — it means the firm leans on inventory turnover or incoming sales to meet obligations, which is normal for supermarkets, restaurants, and other fast-turnover retailers. The right level is heavily sector-dependent, so always compare against peers and against the company’s own trend rather than a fixed threshold.
How is the quick ratio different from the current ratio?
Both divide short-term assets by current liabilities, but the numerator differs. The current ratio uses all current assets, including inventory and prepaid expenses. The quick ratio (acid-test) excludes those, leaving only cash, marketable securities, and receivables. The quick ratio is therefore always lower than or equal to the current ratio, and the size of the gap tells you how much of a firm’s current assets are tied up in inventory. A current ratio comfortably above 1.0 paired with a quick ratio well below 1.0 means the business depends heavily on selling stock to stay liquid.
Why does the quick ratio exclude inventory?
Inventory is the least liquid current asset. Selling it takes time, often requires a discount, and in some sectors — fashion, technology hardware, perishable goods — it may never sell at its balance-sheet value. Prepaid expenses are excluded for a harder reason: they cannot be turned into cash at all, only consumed. By stripping both out, the acid test measures the firm’s ability to pay short-term bills from assets that are already cash or nearly so, giving a more conservative and, for many businesses, more honest read on liquidity.
What counts as a "quick asset"?
The three standard quick assets are cash and cash equivalents, short-term marketable securities (short-term investments that can be sold quickly), and trade accounts receivable expected to be collected within the normal cycle. Some analysts also include other highly liquid receivables — for example vendor non-trade receivables — which raises the ratio. This calculator uses the strict three-line definition to keep the result conservative and comparable; if your balance sheet has other genuinely liquid, quickly collectible assets, you can add them into the receivables field, but be consistent when comparing across periods or firms.
Can the quick ratio be manipulated or misleading?
It can be flattered. A firm can boost the ratio at period-end by delaying supplier payments (though that inflates receivables and payables in tandem), by classifying doubtful receivables as collectible, or by holding excess cash that is really earmarked for known outflows just after the balance-sheet date. A single-date snapshot also misses timing: a healthy-looking ratio can mask a business that runs tight for most of the month. Read it alongside the current ratio, days sales outstanding, and the operating cash flow trend rather than in isolation.
Which industries typically run a low quick ratio?
Businesses with fast inventory turnover and generous supplier terms routinely run quick ratios below 1.0 — often 0.2–0.6 — without any liquidity strain. Supermarkets and grocery chains are the classic example: they collect cash from customers immediately but pay suppliers on 30–60 day terms, so they can operate comfortably with very little in quick assets relative to payables. Restaurants, discount retailers, and some manufacturers follow the same pattern. Capital-light service and software firms, by contrast, often show high quick ratios because they carry little or no inventory in the first place.