Calculate the quick ratio of your business using this calculator. Enter your total cash (and cash equivalent), marketable securities, accounts receivable, and current liabilities.
Quick Ratio Formula
Similar to the current ratio, the quick ratio is a measure of the liquidity of a business. It’s other name goes by the acid-test ratio, which as the name suggests, is a measure of how “acidic” or how much risk a business currently contains.
The following formula is used to calculate the quick ratio of a company.
quick ratio = (C + S + AR) / CL
- Where C is cash and cash equivalents
- S is securities
- AR is accounts receivable
- CL is current liabilities
Each of these variables goes by there name instead of a letter to make sure it’s understood which values go where. Unlike the current ratio, this separates the assets from one another. The liabilities include all outstanding payments, loans, ect.
How to calculate quick ratio?
Here’s an example of how you can use this calculator or formula to calculate the quick ratio of a business.
First, you must take measure of all of your cash. This includes cash equivalents. Lets say you find you currently have $10,000,000.00 in cash.
Next, you need to measure your marketable securities. This will be a measure of the current value of those securities, not potential future value. Lets say you have $5,000,000.00 in securities.
Next, you must take account of all of your current account’s receivable, or pending invoices. Lets say you have $2,000,000.00.
Finally, you need to calculate your total liabilities. This includes all outstanding loans, payments ect. Lets assume you have $10,000,000.00 in liabilities.
Plug all of these into the calculate and you get a quick ratio of 1.7. Anything above 1 is considered a great quick ratio. That means no matter what, you can pay off your debts.