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Businessfinance

Current & Quick Ratio Calculator

Current, quick and cash ratios together. They form a ladder of strictness, and a large gap between the current and quick ratios says the balance sheet is held up by stock.

Also called: current ratio calculator, quick ratio.

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Current ratio
1.64

Current ratio 1.64, quick ratio 1, cash ratio 0.29. Adequate, with little room to spare. The gap between the first two is inventory, which cannot pay a bill this week.

Quick ratio
1
Cash ratio
0.29
Working capital
₹70,00,000
Quick assets
₹1,10,00,000
Assessment
Adequate, with little room to spare.
How this is calculated
Method and background

How this is calculated

The current ratio counts everything due within a year against everything owed within a year. The quick ratio removes inventory and prepayments, which cannot be turned into cash quickly enough to settle a payable next week. The cash ratio keeps only cash. Reading all three at once is more informative than any one: a healthy current ratio with a poor quick ratio means the liquidity is sitting in a warehouse.

each ratio strips out one more thing that cannot readily become cash
CA
Current assets
CL
Current liabilities

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a stock-heavy balance sheet

Current assets
₹1,80,00,000
Of which inventory
₹65,00,000
Of which prepaid
₹5,00,000
Of which cash
₹32,00,000
Current liabilities
₹1,10,00,000

Current ratio1.64

1.1 crore of quick assets against 1.1 crore of liabilities

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no inventory makes the two ratios agree

Current assets
₹1,80,00,000
Of which inventory
₹0
Of which prepaid
₹0
Of which cash
₹1,80,00,000
Current liabilities
₹1,10,00,000

Current ratio1.64

boundary

Open this example

Method and limits

What it assumes

  • Standard classification of current assets and liabilities.

What it deliberately does not model

  • Very high ratios can indicate idle cash or uncollectable receivables rather than strength.
  • What counts as adequate varies enormously between industries.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Is a current ratio of 2 good?
It is the rule of thumb, and like most rules of thumb it depends on the industry. A supermarket runs below one comfortably; a manufacturer with slow stock needs more.
Why exclude inventory from the quick ratio?
Because selling stock takes time and may need a discount. A bill due on Friday cannot be paid with unsold goods.