Quick Ratio Calculator
Businesses use financial ratios as important tools to assess their financial performance and stability.
The quick ratio, which is also called the acid-test ratio, is one of the most important ratios that businesses use to figure out if they can pay off short-term debts with assets they have on hand.
What is the Quick Ratio?
The quick ratio is a financial metric that shows how quickly a company can pay off its current debts without having to sell its stock.
It is found by dividing a company’s total cash, cash equivalents, short-term investments, and current receivables by its total current liabilities.
The quick ratio is thought to be a more conservative measure of a company’s liquidity than the current ratio, which takes inventory into account when calculating it.
What does the Quick Ratio Result Mean?
A quick ratio of 1 or more shows that a company has enough cash on hand to pay off its current debts without having to sell its inventory.
A quick ratio of less than 1 means that the company might not have enough cash on hand to pay its current debts without selling inventory or getting more money.
When the quick ratio is less than one, investors and creditors should be worried that the company may not have enough cash to meet its short-term obligations.
What is the Quick Ratio Calculator?
The quick ratio calculator is an online tool that helps businesses figure out their quick ratio by entering the values for cash, cash equivalents, short-term investments, current receivables, and current liabilities.
The calculator figures out the quick ratio for you and shows the result in the form of a ratio.
How does the Quick Ratio Calculator Work?
The quick ratio calculator employs the quick ratio formula, which is as follows:
Quick Ratio = (Cash + Cash Equivalents + Short-Term Investments + Current Receivables) / Current Liabilities
After you put in the values for cash, cash equivalents, short-term investments, current receivables, and current liabilities, the calculator figures out the answer and shows it as a ratio.
Benefits of Using Our Quick Ratio Calculator
The benefits of using our quick ratio calculator is as follows:
- The quick ratio calculator is simple to use, even for people with limited financial knowledge.
- Businesses can save time by using the calculator instead of manually calculating the quick ratio.
- The calculator produces accurate results, eliminating the possibility of human calculation errors.
- The quick ratio calculator is online, so you can use it from any device that can connect to the internet.
Quick Ratio Formula
The quick ratio formula is:
Quick Ratio = (Cash + Cash Equivalents + Short-Term Investments + Current Receivables) / Current Liabilities
Example
Let’s say a company has $100,000 in cash, $50,000 in cash equivalents, $25,000 in short-term investments, $75,000 in current receivables, and $200,000 in current liabilities.
The quick ratio would be calculated as:
Quick Ratio = ($100,000 + $50,000 + $25,000 + $75,000) / $200,000 = 1.25:1
This quick ratio of 1.25 indicates that the company has more than enough liquidity to cover its current liabilities without selling inventory.
How Do You Use Our Quick Ratio Calculator?
It is simple to use our quick ratio calculator. Simply follow these steps:
- Fill in the values for cash, cash equivalents, short-term investments, current receivables, and current liabilities.
- Click the “Calculate” button to perform the calculation.
- The calculation result will be displayed in a ratio format. If you need to change any of the inputs, click the “Reset” button to clear the fields and start over.
The quick ratio calculator is a great way for businesses to figure out how healthy their finances are and if they can pay off short-term debts.
By using our quick ratio calculator, businesses can figure out their quick ratio quickly and easily, saving time and reducing the chance of making mistakes when doing the math by hand.
When businesses know their quick ratio, they can make smart decisions about their financial stability and make changes where they need to.
