Quick Ratio (Acid Test Ratio) Calculator
The quick ratio (also called the acid-test ratio) shows how easily a company can pay its short-term debts using its most liquid assets — that is, assets that can be quickly turned into cash.
What is Quick Ratio (Acid Test Ratio)?
The Quick Ratio, also called the Acid Test Ratio, measures a company’s ability to pay its short-term debts without relying on the sale of inventory.
It gives a clearer picture of your business’s immediate financial strength and liquidity position.
Formula:
Quick Ratio = (Cash + Accounts Receivable + Marketable Securities) ÷ Current Liabilities
Example:
If your company has:
- Cash = ₹1,50,000
- Accounts Receivable = ₹2,00,000
- Marketable Securities = ₹50,000
- Current Liabilities = ₹3,00,000
Then,
Quick Ratio = (1,50,000 + 2,00,000 + 50,000) ÷ 3,00,000 = 1.33
That means your company has ₹1.33 in liquid assets for every ₹1 of short-term debt — a healthy position.
Ideal Quick Ratio (International Standard)
According to financial experts and international standards:
- ✅ 1.0 – 1.5: Healthy — good short-term liquidity
- ⚠️ Below 1.0: Risky — may struggle to pay short-term debts
- ⚠️ Above 2.0: Too conservative — might indicate idle cash or underutilized assets
Why is Quick Ratio Important for Bank Loan?
The Quick Ratio helps:
- Assess short-term financial health
- Evaluate if a company can survive sudden cash flow issues
- Identify over-reliance on inventory for liquidity
- Help investors and lenders judge creditworthiness
This ratio is especially useful for banks, NBFCs, SMEs, and manufacturing businesses seeking to maintain a balanced working capital position.
How to Use hellobanker Quick Ratio Calculator
- Enter your Cash and Cash Equivalents (cash in hand or bank).
- Enter Accounts Receivable (amount customers owe you).
- Add Marketable Securities (easily sellable investments).
- Enter your Current Liabilities (short-term dues).
- Click “Calculate” to instantly see your Quick Ratio and its interpretation.
Interpretation
| Quick Ratio | Interpretation |
|---|---|
| > 1.5 | Excellent liquidity — but may indicate idle cash. |
| 1.0 – 1.5 | Ideal — good financial balance. |
| 0.8 – 1.0 | Moderate — monitor closely. |
| < 0.8 | Weak — liquidity risk present. |
Frequently Asked Questions (FAQs) about Quick Ratio Calculator
1. What is a good Quick Ratio?
A Quick Ratio between 1.0 and 1.5 is considered healthy for most businesses.
2. Why is it called the Acid Test Ratio?
Because it “tests” how quickly a company can pay its short-term debts using only its most liquid assets — just like an acid test reveals true metal purity.
3. What’s the difference between Quick Ratio and Current Ratio?
The Current Ratio includes inventory, while the Quick Ratio excludes it, offering a more conservative view of liquidity.
4. Can Quick Ratio be too high?
Yes. A very high ratio may mean the company is not using its cash effectively to grow the business.