Liquidity ratios calculator

Formula

How it works

The current ratio compares current assets with current liabilities. The quick ratio excludes inventory, which can take time to turn into cash. Working capital is the difference between current assets and current liabilities.

Worked example

The same calculation with the default values:

• Current assets 90,000
• Inventory (included in current assets) 30,000
• Current liabilities 50,000

1. working capital = 90,000 − 50,000 = 40,000
2. current ratio = 90,000 ÷ 50,000 = 1.8
3. quick ratio = (90,000 − 30,000) ÷ 50,000 = 1.2

Result: Working capital: 40,000.00 USD · Current ratio: 1.8 · Quick ratio: 1.2

Common mistakes

• Treating a higher current ratio as always better - an excessively high ratio can mean cash or inventory is sitting idle instead of being invested productively in the business.
• Ignoring the gap between the current ratio and the quick ratio - a large gap means most of the "current assets" are inventory, which can be slow or difficult to convert to cash if needed quickly.
• Comparing these ratios across industries without adjustment - a retailer carrying lots of inventory and a services business with almost none have structurally different normal ranges.