# Quick Ratio Calculator (Acid Test Ratio)

LAST UPDATE: September 24th, 2020

## Definition – What is the Quick Ratio (aka Acid Test Ratio)?

The Quick Ratio (also known as the Acid Test Ratio) is a measure of how well a company can meet a short-term financial obligation.

A high quick ratio means that a company can easily pay a short-term financial obligation. A low quick ratio means they might not be able to pay it.

## Formula – How to calculate the Quick Ratio

Quick Ratio (Standard) = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities

Quick Ratio (Alternate) = (Current Assets – Inventory) / Current Liabilities

### Example

Standard – A company has cash of \$3,000, marketable securities of \$4,000, accounts receivable of \$3,000, and current liabilities of \$5,000.

Quick Ratio (Standard) = (\$3,000 + \$4,000 + \$3,000) / \$5,000 = \$10,000 / \$5,000 = 2.00

Alternate – A company has current assets of \$10,000, inventory of \$4,500, and current liabilities of \$5,000.

Quick Ratio (Alternate) = (\$10,000 – \$4,500) / \$5,000 = \$5,500 / \$5000 = 1.10