# 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 $$(CL)$$: Current Assets $$(CA)$$ = Inventory $$(I)$$ = Current Liabilities $$(CL)$$ =

## Quick Ratio Calculator

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.