Free calculator
Quick Ratio Formula and Calculator
The quick ratio shows whether a business can pay its short-term debts without selling any stock. It's also called the acid-test ratio. The formula is (cash + short-term investments + accounts receivable) ÷ current liabilities. Use the calculator, or watch Claude or ChatGPT work it out from a set of books.
Work it out here
Example figures from a sample balance sheet. Type over them with your own.
You have $1.23 in quick assets for every $1 due within a year. That's healthy. You can cover it without selling any stock.
The formula: (Cash + Short-term investments + Receivables) ÷ Current liabilities
Or ask Claude or ChatGPT
Kipper MCP What's our quick ratio?
- Asking Kipper for last month's balance sheet…
- Adding up cash, investments and receivables…
- Leaving out stock and prepaid costs…
- Dividing by current liabilities…
1.23. You have $1.23 in quick assets for every $1 due within a year. The figures come from your balance sheet. The ratio is my arithmetic.
| Amount | |
|---|---|
| Cash and investments | $612,400 |
| Money customers owe | $948,300 |
| Current liabilities | $1,268,000 |
| Quick ratio | 1.23 |
Why is it so much lower than our current ratio?
- Kipper is pulling your current assets, line by line…
- Finding what the quick ratio leaves out…
- Working out both ratios…
Because it leaves out your stock, worth $1,184,500. With stock, your current ratio is 2.20. Without it, you get 1.23.
| Amount | |
|---|---|
| Current assets | $2,792,000 |
| Stock | -$1,184,500 |
| Prepaid costs | -$46,800 |
| Quick assets | $1,560,700 |
Has it changed over the last six months?
- Asking Kipper for six months of balance sheets…
- Working out the ratio for each month…
- Charting it…
It's gone up, from 1.06 in March to 1.23 last month. Stock came down by $133,900, and cash went up by about the same.
Quick Ratio Open Quick Ratio
Mar to Aug · NetSuite
Quick ratio, by month
What's in our current liabilities?
- Kipper is reading your current liabilities…
- Grouping them by type…
- Adding them up…
Mostly bills from suppliers, at $702,600. The rest is your line of credit, and payroll and taxes owed.
| Amount | |
|---|---|
| Bills from suppliers | $702,600 |
| Line of credit | $250,000 |
| Payroll and taxes owed | $315,400 |
| Total | $1,268,000 |
What's our cash ratio?
- Asking Kipper for cash and short-term investments…
- Leaving out what customers owe…
- Dividing by current liabilities…
0.48. Cash and investments alone cover about half of what's due. It's stricter than the quick ratio, because it leaves out receivables.
| Amount | |
|---|---|
| Cash | $487,400 |
| Short-term investments | $125,000 |
| Current liabilities | $1,268,000 |
| Cash ratio | 0.48 |
ChatGPT can make mistakes. Check important info.
A recorded example. Open the interactive demo to ask your own questions.
The formula
How to calculate the quick ratio
Three steps, all from your balance sheet.
Add up your quick assets
Cash, short-term investments and money customers owe. They can turn into cash within about 90 days.
Find your current liabilities
Everything due within a year: supplier bills, short-term loans, payroll and taxes. Your balance sheet totals it.
Divide quick assets by current liabilities
Above 1 means you can pay what's due without selling any stock.
Quick ratio
Quick assets ÷ Current liabilities
The sample: $1,560,700 ÷ $1,268,000 = 1.23.
From current assets
(Current assets − Stock − Prepaid) ÷ Current liabilities
The same sample: ($2,792,000 − $1,184,500 − $46,800) ÷ $1,268,000 = 1.23. Both ways give the same answer.
Cash ratio
(Cash + Investments) ÷ Current liabilities
Stricter still, because it leaves out receivables. Here: $612,400 ÷ $1,268,000 = 0.48.
Reading it
What is a good quick ratio?
Above 1 is the usual target. Businesses that hold a lot of stock, like retailers, often run lower. Service businesses hold little stock, so theirs often runs higher. Compare yourself with businesses like yours.
Below 1
Quick assets don't cover what's due within a year. You'd be relying on selling stock, or on new sales, to pay it all.
1 to 1.5
Healthy. You can pay what's due within a year without selling any stock.
1.23 the sample business1.5 to 3
Very healthy, with plenty to spare if sales slow down.
Above 3
Very high. Some of that cash could be put to work in the business.
In your books
Quick ratio vs current ratio
Both come from your balance sheet. The current ratio counts every current asset. The quick ratio leaves out stock and prepaid costs, because they're slow to turn into cash.
- Stock has to be sold before it's cash, and that can take months.
- Prepaid costs, like insurance paid ahead, won't come back as cash.
- Here, stock is $1,184,500. So the current ratio is 2.20, and the quick ratio is 1.23.
- Need the other one? Use our current ratio calculator.
| CashQuick asset | Quick asset | $487,400 |
| Short-term investmentsQuick asset | Quick asset | $125,000 |
| Accounts receivableQuick asset | Quick asset | $948,300 |
| StockLeft out | Left out | $1,184,500 |
| Prepaid costsLeft out | Left out | $46,800 |
| Current assets | $2,792,000 | |
| Current liabilities | $1,268,000 | |
| Current ratio | all current assets | 2.20 |
| Quick ratio | quick assets only | 1.23 |
Related terms
The quick ratio and the terms people mix it up with
Each one measures how easily you can pay what's due. Here's what it means and how to work it out.
Quick ratio
Quick assets as a multiple of current liabilities. Also called the acid-test ratio.
Quick assets ÷ current liabilitiesQuick assets
Assets that turn into cash within about 90 days.
Cash + investments + receivablesCurrent ratio
Every current asset, stock included, over current liabilities.
Current assets ÷ current liabilitiesCash ratio
Only cash and short-term investments over current liabilities.
(Cash + investments) ÷ current liabilitiesWorking capital
What's left of current assets after paying current liabilities.
Current assets − current liabilitiesCurrent liabilities
Everything due within a year.
Bills + short-term debt + accrualsSide by side
A calculator vs asking your books
A calculator works out the figures you type. Here's what changes when Claude or ChatGPT can read your books instead.
Pick each line off your balance sheet by hand.
Read straight off your balance sheet.
Easy to leave stock or prepaid costs in by mistake.
Each line is listed, so you can check it.
Compare two balance sheets yourself.
Ask why it changed, and see the lines that moved.
Find the figures and type them in again.
Ask the same question. The figures are current.
It's only as good as what you typed.
Every figure traces back to your books.
Connect your books and skip the typing
Start free, connect QuickBooks, Xero or NetSuite, and ask for your real quick ratio.
Both assistants
Use Claude or ChatGPT: Kipper works with both
Your team can use Claude or ChatGPT to work out the quick ratio and ask follow-up questions. Either way, the figures come straight from your books. Click a card to see it in the demo.
Kipper MCP What's our quick ratio?
- Asking Kipper for last month's balance sheet…
- Adding up cash, investments and receivables…
- Leaving out stock and prepaid costs…
- Dividing by current liabilities…
1.23. You have $1.23 in quick assets for every $1 due within a year. The figures come from your balance sheet. The ratio is my arithmetic.
| Amount | |
|---|---|
| Cash and investments | $612,400 |
| Money customers owe | $948,300 |
| Current liabilities | $1,268,000 |
| Quick ratio | 1.23 |
Why is it so much lower than our current ratio?
- Kipper is pulling your current assets, line by line…
- Finding what the quick ratio leaves out…
- Working out both ratios…
Because it leaves out your stock, worth $1,184,500. With stock, your current ratio is 2.20. Without it, you get 1.23.
| Amount | |
|---|---|
| Current assets | $2,792,000 |
| Stock | -$1,184,500 |
| Prepaid costs | -$46,800 |
| Quick assets | $1,560,700 |
Has it changed over the last six months?
- Asking Kipper for six months of balance sheets…
- Working out the ratio for each month…
- Charting it…
It's gone up, from 1.06 in March to 1.23 last month. Stock came down by $133,900, and cash went up by about the same.
Quick Ratio Open Quick Ratio
Mar to Aug · NetSuite
Quick ratio, by month
What's in our current liabilities?
- Kipper is reading your current liabilities…
- Grouping them by type…
- Adding them up…
Mostly bills from suppliers, at $702,600. The rest is your line of credit, and payroll and taxes owed.
| Amount | |
|---|---|
| Bills from suppliers | $702,600 |
| Line of credit | $250,000 |
| Payroll and taxes owed | $315,400 |
| Total | $1,268,000 |
What's our cash ratio?
- Asking Kipper for cash and short-term investments…
- Leaving out what customers owe…
- Dividing by current liabilities…
0.48. Cash and investments alone cover about half of what's due. It's stricter than the quick ratio, because it leaves out receivables.
| Amount | |
|---|---|
| Cash | $487,400 |
| Short-term investments | $125,000 |
| Current liabilities | $1,268,000 |
| Cash ratio | 0.48 |
ChatGPT can make mistakes. Check important info.
Connect once, then ask from either one
Read-only access to QuickBooks, Xero or NetSuite, with the same permissions behind each.
FAQ
Quick ratio questions
What people ask about the quick ratio, and how to work it out.
Get your real quick ratio from your books
One read-only connection to QuickBooks, Xero or NetSuite. Then ask Claude or ChatGPT for your quick ratio, and what's behind it. We'll help you set it up.
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