Acid Test Ratio Calculator: Assess Your Company’s Liquidity Quickly
The acid-test ratio compares your most liquid assets with debts due inside 12 months; a score above 1 suggests healthy short-term liquidity for most non-financial firms (Investopedia, 2023).
Acid Test Ratio Calculator
Result:
The Acid Test Ratio (Quick Ratio) measures a company's ability to pay its short-term liabilities using its most liquid assets.
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How to use the tool
Follow these steps to gauge your firm’s short-term liquidity:
Cash & Cash Equivalents: Type values such as 18 750 or 33 420.
Marketable Securities: Add amounts like 4 600 or 12 900.
Accounts Receivable: Enter figures, e.g., 9 700 or 19 200.
Current Liabilities: Provide debts due within 12 months, e.g., 25 400 or 41 800 (must exceed 0).
Calculate: Press “Calculate” to obtain the ratio instantly.
Interpret: A result above 1 signals ample liquid assets to meet near-term obligations.
Formula
Only the quickest assets feature in the computation:
An acid-test ratio above 1 is generally viewed as healthy (Investopedia, 2023).
The median quick ratio for U.S. non-financial firms was 1.15 in 2022 (Damodaran, 2023).
Inventory forms roughly 31 % of current assets in manufacturing companies (U.S. Census ASM 2022).
“Current liabilities are those due within twelve months” (IAS 1, IASB 2020).
The calculator is free and processes data locally—no upload required.
FAQ
What does the acid-test ratio show?
The ratio reveals how many dollars of instantly liquid assets you hold for every dollar of short-term debt, spotlighting your ability to pay bills without selling inventory (Investopedia, https://www.investopedia.com/terms/q/quickratio.asp).
How is it different from the current ratio?
The current ratio includes inventory and prepaid expenses; the acid-test ratio excludes them, giving a stricter view of liquidity (Harvard Business Review, 2021).
What is a “good” acid-test ratio?
Analysts consider 1.0–2.0 acceptable for most service and tech firms, while capital-intensive sectors average closer to 0.9 (Damodaran, 2023).
Can the ratio be too high?
Yes. A score above 3 can hint at idle cash that could earn higher returns elsewhere (McKinsey Quarterly, 2022).
How do you improve a low ratio?
Speed up collections, renegotiate payment terms, or convert unused inventory to cash to lift liquid assets (Small Business Administration, 2022).
Does industry matter?
Absolutely. Retailers with fast inventory turnover can operate safely at 0.7, while consulting firms typically target 1.5 (PwC Working Capital Report 2023).
Monthly reviews align with most cash-flow cycles and enable timely corrective action (CFO Magazine, 2023).
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