Liquidity Ratios Calculator (Current, Quick, Cash Ratio)
Calculates the current ratio, quick (acid-test) ratio, cash ratio and net working capital from your balance sheet to show how well short-term debts can be covered.
Things to keep in mind:
- What counts as a "good" level depends on the industry and business model; the tool does not suggest thresholds.
- Collectability and maturity of receivables and inventories are not modelled; receivables are treated as liquid in the quick ratio.
- Use period-end balance sheet values; seasonality can distort the result.
- For information only; consult your accountant before credit or investment decisions.
Calculator
Result
Enter the values and press Calculate to see the result here.
About this tool
Liquidity ratios measure how comfortably a business can meet its short-term obligations from its current assets. This calculator derives four indicators from current assets, inventories, cash and current liabilities; you only need to enter period-end balance sheet values.
Formulas
- Current ratio = Current assets / Current liabilities
- Quick ratio = (Current assets − Inventories − Prepaid expenses) / Current liabilities
- Cash ratio = (Cash + Marketable securities) / Current liabilities
- Net working capital = Current assets − Current liabilities
Ratios are rounded to 2 decimals and amounts to cents, half up (HALF_UP). Quick assets (the numerator) never fall below zero. Current liabilities must be greater than zero.
Example 1: current assets 500,000, inventories 180,000, prepaid expenses 20,000, cash 80,000, securities 20,000 and current liabilities 250,000 give a current ratio of 2.00, a quick ratio of (500,000 − 180,000 − 20,000) / 250,000 = 1.20, a cash ratio of 100,000 / 250,000 = 0.40 and net working capital of 250,000.00.
Example 2 (negative working capital): current assets 100,000, inventories 60,000, prepaid expenses 3,000, cash 5,000 and current liabilities 150,000 give a current ratio of 0.67, a quick ratio of 0.25, a cash ratio of 0.03 and net working capital of −50,000.00.
How to read the result: A current ratio below 1 means current liabilities cannot be covered by current assets (net working capital is negative); a very high ratio may point to idle resources. The quick ratio leaves out inventories and prepaid expenses and is a stricter measure; the cash ratio is the strictest and looks only at cash and securities. The gap between them shows how much of current assets is tied up in inventory. What is healthy depends on the industry; compare the result with the industry average and your own earlier periods. To see them alongside other ratios, you can also use the Financial Health Analysis tool.
How to use
- Enter current assets from the balance sheet, plus inventories and prepaid expenses if any.
- Enter cash and equivalents and any marketable securities.
- Enter total current liabilities.
- Press Calculate and compare the ratios with your industry average.
Notes
Ratios are rounded HALF_UP to 2 decimals and amounts to 2 decimals. Quick assets never fall below zero. A single balance-sheet date is used; enter period-end values.
Sources
Frequently asked questions
A range of 1.5-2 is often quoted, but retail, manufacturing and services differ. The industry average and the trend over time matter more. For example, current assets of 500,000 against current liabilities of 250,000 give a ratio of 2.00.
Inventories may take time and discounts to convert into cash, so the stricter quick ratio leaves them (and prepaid expenses) out of current assets. In the same example the ratio drops from 2.00 to 1.20.
Current liabilities exceed current assets, so the business may need new financing or faster collections. Some fast-cash businesses (grocery, restaurants) can run with negative working capital.
Firms rarely hold large idle cash balances; the cash ratio is the strictest measure. In the example, cash and securities of 100,000 against liabilities of 250,000 give 0.40. What is suitable varies by industry.
The tool uses period-end values from a single balance sheet date. For seasonal businesses period-end balances may not reflect swings during the year; in that case calculate for different dates separately.
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