Frequently Asked Questions
What is the quick ratio?
Quick Ratio = (cash + marketable securities + receivables) / current liabilities. Measures ability to pay short-term obligations without selling inventory. Also called "acid-test ratio." Quick ratio of 1.0 = exactly enough liquid assets.
What's a healthy quick ratio?
Above 1.0 is generally healthy. 1.0-2.0 ideal for most industries. Below 1.0 = liquidity risk. Above 3.0 may indicate inefficient capital allocation. Compare to direct competitors and trend over time.
How is quick ratio different from current ratio?
Current Ratio includes inventory; Quick Ratio excludes it. For grocery/manufacturing where inventory is liquid, current ratio is fine. For specialty retail, jewelry, or seasonal businesses where inventory may not sell quickly, quick ratio gives a more conservative liquidity measure.
Why do quick-ratio benchmarks differ so much between industries?
Retail and restaurants run lean at 0.4-0.6 because inventory turns fast and customers pay cash, while SaaS and professional services often run 1.5+ thanks to deferred revenue and subscription billing. Always compare to direct competitors rather than a universal target.
How can I improve my quick ratio?
Accelerate receivables with early-pay discounts or invoice factoring, negotiate longer payable terms, convert idle inventory to cash through promotions, refinance short-term debt into long-term, and establish a revolving credit facility as a backstop.
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Business Information Disclaimer: Estimates only. Not professional business advice.
This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.