# Quick Ratio Calculator

**
Instructions:
**
Use our Quick Ratio Calculator with steps, to compute the quick ratio \((QR)\) for a firm. You need to provide the current
assets \((CA)\), the inventory \((I)\) and the current liabilities \((CL)\):

## Quick Ratio Calculator

More about this
*
quick ratio calculator
*
that will help you interpret the results provided by this solver

The quick ratio corresponds to the ratio between the liquid current assets and current liabilities. This ratio is a measure of short term liquidity and it indicates how many times can current debt and liabilities be paid using only its liquid current assets.

### How is the quick ratio computed?

The quick ratio is computed as:

\[ QR = \displaystyle \frac{CA - I}{CL}\]What is the importance of the quick ratio? It is quite important, because the quick ratio measures the short term liquidity of a firm, but it corrects the current ratio by not considering assets that are not totally liquid in the short term, like inventories.

### Is a high quick ratio good?

In general terms, the answer is yes, because a higher quick ratio indicates more liquidity. But then the question is : What is a good quick ratio? How high a quick ratio needs to be in order to be considered good?

A good quick ratio will be greater than 1, but it is something that changes from industry to industry. Indeed, a firm will want to have a quick ratio that is larger than 1, and ideally is higher than the average for the industry in which the company operates in.

### Quick ratio example

**Question**: A manager of a firm is concerned about short-term liquidity. If the firm's current assets are $10,000, the inventory
is $4,000, and the current liability are $5,500, what is the quick ratio of the firm?

Solution:

This is the information we have been provided with:

• The current assets are \(CA = 10000\), the inventory is \(I = 4000\), and the current liabilities are \(CL = 5500\)

Hence, the quick ratio \(QR\) is computed using the following formula:

\[ \begin{array}{ccl} QR & = & \displaystyle \frac{\text{Current Assets - Inventory}}{\text{Current Liabilities}} \\\\ \\\\ & = & \displaystyle \frac{10000 - 4000}{5500} \\\\ \\\\ & = & \displaystyle \frac{6000}{5500} \\\\ \\\\ & = & 1.09 \end{array} \]Therefore, the quick ratio, for the given current assets of \(CA = 10000\), inventory of \(I = 4000\) and current liabilities of \(CL = 5500\), is \(QR = 1.09 \). This means that firm can pay \(1.09\) times of its current (short-term) debt and obligations with its more liquid current assets.

### Other financial calculators that measure liquidity

You can use also our current ratio calculator , which includes inventories in the liquid assets. Also, you may be interested in using our inventory turnover ratio calculator , in order to deal how a firm deals and how efficiently they deal with their inventories.