Working Capital, Current Ratio & Quick Ratio Liquidity Calculator

Corporate Finance: Current Ratio vs. Quick Ratio (Acid-Test)

Working capital measures a company's operational liquidity and short-term financial health.

Why Quick Ratio Excludes Inventory

While the Current Ratio includes inventory, inventory cannot always be liquidated immediately for cash without substantial fire-sale discounts. The Quick Ratio (Acid-Test) isolates only instant cash and liquid accounts receivable to test whether a company can pay all short-term bills due tomorrow without needing to sell another piece of merchandise.

How to Use This Calculator

Enter your Cash & Cash Equivalents () (e.g. 85000), Accounts Receivable (A/R in ) (e.g. 120000 (Unpaid customer invoices)), Inventory & Raw Materials () (e.g. 95000), Other Current Assets ( - Prepaid expenses) (e.g. 15000), Accounts Payable (A/P in ) (e.g. 75000 (Vendor/supplier bills)), Short-Term Debt & Current Portion of Long-Term Debt () (e.g. 40000), Accrued Expenses, Payroll & Taxes () (e.g. 30000), and Annual Gross Revenue / Sales () [for Turnover] (e.g. 1200000). Results update instantly as you type — adjust any value to compare scenarios.

The Formula

Corporate balance sheet liquidity & working capital formulas: Current Assets = Cash + Accounts Receivable + Inventory + Other Current Assets Current Liabilities = Accounts Payable + Short-Term Debt + Accrued Expenses Working Capital (NWC) = Total Current Assets - Total Current Liabilities Ratio = (Total Current Assets) / (Total Current Liabilities) Ratio (Acid-Test) = (Cash + Accounts Receivable) / (Total Current Liabilities) Capital Turnover = (Annual Sales / Revenue) / (Net Working Capital)

Worked Example

For example, a business with 85,000 Cash, 120,000 A/R, 95,000 Inventory (315,000 Current Assets) and 75,000 A/P, 40,000 Short-Term Debt, 30,000 Accruals (145,000 Current Liabilities) with 1.2M annual sales: Net Working Capital is . The Current Ratio is . The Quick Ratio (excluding inventory) is . Working Capital Turnover is 7.06x.

Understanding Your Result

The cash conversion cycle (CCC) = Days Sales Outstanding + Days Inventory Outstanding – Days Payable Outstanding. A shorter (or negative) CCC means cash comes in faster than it goes out — Amazon famously has a negative CCC. Current ratio (current assets ÷ current liabilities) above 1.5 is generally considered healthy; below 1.0 indicates liquidity risk. Quick ratio (excluding inventory) above 1.0 is the standard benchmark for businesses that cannot quickly liquidate inventory. Working capital of 10–20% of annual revenue is a typical target for stable SMBs.