The quick ratio is a stricter version of the current ratio: inventory is left out, since it’s the current asset slowest and least certain to convert into cash on short notice.
How it works
Current assets minus inventory, divided by current liabilities. A business heavy on inventory can look comfortably liquid on the current ratio while the quick ratio tells a tighter story if that inventory doesn’t sell quickly.
How to use this calculator
- Enter current assets, inventory, and current liabilities from a balance sheet.
A worked example
Current assets $150,000, inventory $50,000, current liabilities $90,000: quick assets = 150,000 − 50,000 = 100,000, ratio = 100,000 ÷ 90,000 = 1.111111.
Current assets $80,000, inventory $10,000, liabilities $100,000: quick assets = $70,000, ratio = 0.7.
What the variables mean
| Variable | Meaning |
|---|---|
| Current assets | Cash and near-cash assets due within a year |
| Inventory | Stock on hand, excluded because it can’t always be sold quickly |
| Current liabilities | Debts due within a year |
Edge cases worth knowing
This is stricter than the current ratio because it excludes inventory — a company can look healthy on the current ratio but weak on the quick ratio if most of its current assets are unsold stock.
Zero current liabilities makes the ratio undefined, the same way it does for the current ratio — nothing to divide by.
Frequently asked questions
Why exclude inventory specifically?
Of all current assets, inventory typically takes the longest and is least certain to convert to cash — cash, receivables and marketable securities are all faster and more reliable.
What’s considered a healthy quick ratio?
1.0 or above is commonly cited as comfortable, meaning the most liquid assets alone cover current liabilities without relying on inventory sales.
