The quick ratio formula
Two mathematically equivalent forms, both verified June 2026 against the Corporate Finance Institute definition and the Subramanyam textbook.
Divide the most-liquid current assets (cash, marketable securities, accounts receivable) by current liabilities. The result is the quick ratio.
Primary form
Quick Ratio = (Cash + Marketable Securities + Accounts Receivable)
/ Current LiabilitiesThis is the form used by the calculator on this site. It maps directly to balance-sheet line items most companies report.
Verified June 2026. Source: Corporate Finance Institute.
Alternative form
Quick Ratio = (Current Assets - Inventory - Prepaid Expenses)
/ Current LiabilitiesThis form is convenient when the balance sheet reports a single total-current-assets line rather than itemising cash, marketable securities, and receivables. The two forms produce the same number when prepaid expenses are excluded from quick assets.
Verified June 2026. Source: White, Sondhi and Fried, The Analysis and Use of Financial Statements, 3rd Edition, Chapter 4 (pp. 111-118).
Balance-sheet mapping
| Quick ratio input | Where to find it | Notes |
|---|---|---|
| Cash | Current assets, first line item | Includes cash on hand and demand deposits. |
| Marketable securities | Current assets, often labelled "short-term investments" | Securities convertible to cash within 90 days at par or near-par. |
| Accounts receivable | Current assets, net of allowance for doubtful accounts | Use net rather than gross AR. Note any factoring or securitisation arrangements separately. |
| Current liabilities | Liabilities section, current portion | Includes accounts payable, accrued expenses, current portion of long-term debt. |
Common pitfalls
- Forgetting net AR. Using gross receivables inflates the numerator. Always use the figure net of allowance for doubtful accounts.
- Including restricted cash. Restricted cash (escrow, debt-service reserves) is not freely available for liabilities and should be excluded.
- Misclassifying long-term debt. Only the current portion belongs in the denominator. Inclusion of all interest-bearing debt produces a meaningless number.
- Ignoring revolver capacity. A firm with a large undrawn revolver and a quick ratio of 0.6 may have stronger liquidity than the ratio suggests. Read the credit footnotes.