Quick Ratio Calculator

Formula

The formula to calculate the Quick Ratio is:

\[ \text{Quick Ratio} = \frac{\text{C} + \text{S} + \text{AR}}{\text{CL}} \]

Where:

$\text{C}$ is cash and cash equivalents
$\text{S}$ is securities
$\text{AR}$ is accounts receivable
$\text{CL}$ is current liabilities

What is Quick Ratio?

The Quick Ratio is a financial metric that measures a company’s ability to cover its short-term liabilities with its most liquid assets. It is a more stringent measure than the current ratio because it excludes inventory from current assets. A higher quick ratio indicates better liquidity and financial health.

Example Calculation 1

Let's assume the following values:

Cash and Cash Equivalents (C) = \$50,000
Securities (S) = \$30,000
Accounts Receivable (AR) = \$20,000
Current Liabilities (CL) = \$40,000

Using the formula:

\[ \text{Quick Ratio} = \frac{50,000 + 30,000 + 20,000}{40,000} = 2.50 \]

The Quick Ratio is 2.50.

Example Calculation 2

Let's assume the following values:

Cash and Cash Equivalents (C) = \$40,000
Securities (S) = \$20,000
Accounts Receivable (AR) = \$10,000
Current Liabilities (CL) = \$50,000

Using the formula:

\[ \text{Quick Ratio} = \frac{40,000 + 20,000 + 10,000}{50,000} = 1.40 \]

The Quick Ratio is 1.40.