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.
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.
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
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 · United States · 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.