Worked example

Acme SaaS Co. (illustrative)

A step-by-step quick ratio calculation on a fictional SaaS balance sheet. Numbers chosen to demonstrate the methodology, not to model any real company.

Illustrative example, not a real company. Acme SaaS Co. does not exist. The balance-sheet figures below are chosen so the arithmetic is easy to follow and the verdict is unambiguous. Do not use these figures as a proxy for any actual software company.

Step 1 - Read the balance sheet

Line item	$ (000)
Cash and equivalents	12,000
Marketable securities (short-term)	6,000
Accounts receivable (net)	8,000
Prepaid expenses (excluded)	1,200
Inventory (none for SaaS)	0
Current liabilities	11,000

Step 2 - Compute quick assets

Quick assets = 12,000 + 6,000 + 8,000
             = 26,000 (thousand dollars)

Prepaid expenses are not quick assets and are excluded. Inventory is zero for a pure software firm, so no separate inventory exclusion is needed.

Step 3 - Divide by current liabilities

Quick ratio = 26,000 / 11,000
            = 2.36

Step 4 - Compare against the sector band

The expected quick ratio band for Software (System and Application) is 1.2 to 2.5, triangulated from the Damodaran NYU Stern Working Capital dataset (AR / Sales 16.84%, inventory near zero) and Subramanyam Chapter 10. Acme SaaS Co.'s 2.36 sits inside the band.

Verified June 2026. Source: Damodaran NYU Stern, Working Capital Requirements by Industry Sector. US data, last update January 2026.

Verdict

Acme SaaS Co.'s quick ratio of 2.36 sits comfortably inside the Damodaran-triangulated band of 1.2 to 2.5 for software firms. Liquidity is healthy; current liabilities are fully covered by cash, marketable securities, and receivables with no need to sell inventory.