Test whether a company can cover its short-term bills without selling inventory. Enter current assets, inventory and current liabilities for the quick ratio — the strict acid test of liquidity.
Answer first: the quick ratio — also called the acid-test ratio — measures whether a company could pay off all its short-term liabilities right now using only its most liquid assets, without having to sell any inventory. This quick ratio calculator removes inventory from current assets and divides by current liabilities, and also shows the broader current ratio for comparison.
Quick ratio = (Current assets − Inventory) ÷ Current liabilities
Example: $300M of current assets, $120M of it inventory, against $150M of current liabilities. Quick assets are 300 − 120 = $180M, so the quick ratio is 180 ÷ 150 = 1.2. The current ratio, which keeps inventory, is 300 ÷ 150 = 2.0 — the gap shows how much of the cushion depends on selling stock.
The acid test earns its dramatic name because it is deliberately harsh. Inventory is excluded because it is the hardest current asset to turn into cash quickly and at full value — a struggling company facing a cash crunch may have to dump stock at a steep discount, or find it will not sell at all. What remains — cash, marketable securities and receivables — is money the company can realistically get its hands on within weeks to meet bills that are already due.
A quick ratio of 1.0 or higher means a company could, in principle, cover every short-term obligation from liquid assets alone with nothing left over from inventory — generally reassuring. Below 1.0 means it depends on selling inventory, collecting receivables faster, or borrowing to pay its near-term bills. That is not automatically a crisis, but it is a flag worth investigating, especially for a business in a slowing market.
The current ratio is the friendlier, more forgiving liquidity measure because it counts inventory as an asset that can be converted to cash. The quick ratio is the sceptic's version. The difference between them is a story about the business: a supermarket or fashion retailer holds huge inventory, so its current ratio may look healthy while its quick ratio is well under 1.0 — and that is normal for the sector, because they sell stock for cash every day. A software or services firm carries almost no inventory, so its two ratios are nearly identical. Always read the pair together, and always against industry norms.
Like all balance-sheet ratios, the quick ratio is a single moment frozen in time, and it can be flattered or distorted by the timing of a big receipt or payment near the reporting date. It also treats all receivables as good, when some may never be collected. A very high quick ratio is not necessarily ideal either — it can mean a company is hoarding idle cash instead of investing it productively. Use the quick ratio as one gauge on a dashboard that also includes the working capital, interest coverage and debt-to-equity ratios.
Reality check: a healthy quick ratio does not guarantee solvency, and what counts as healthy differs sharply by industry. This tool is educational, not investment advice. For financial-statement basics, see the U.S. SEC at investor.gov.
Compare with the current ratio calculator and working capital calculator, check debt-servicing ability with the interest coverage calculator, and gauge leverage with the debt-to-equity calculator.
Last updated July 4, 2026 · Written by Mustafa Bilgic. Educational only — not financial advice.
A quick ratio of 1.0 or higher generally means a company can cover its short-term liabilities from liquid assets without selling inventory. What counts as healthy varies by industry — inventory-heavy retailers often run below 1.0 quite safely.
The current ratio includes inventory in current assets; the quick ratio excludes it. Because inventory is the slowest current asset to convert to cash, the quick ratio is a stricter test of immediate liquidity.
Inventory can be hard to sell quickly at full value, especially for a company already under financial stress. Removing it leaves only cash, marketable securities and receivables — assets that can realistically be turned into cash within weeks.
Yes. A very high quick ratio may mean a company is holding excessive idle cash or receivables instead of investing in growth. Extremely high liquidity is not free — that capital could be earning a return elsewhere.