Liquidity Ratios Calculator
This calculator provides the user with the three most common liquidity ratios. Using current assets and current liabilities from the balance sheet, this calculator provides the current, quick and cash ratio.
The variables used in our online calculator are defined in detail below, including how to interpret the results.
The first five inputs for this calculator are current assets. This detail is found on the company's balance sheet.
Cash and Cash Equivalents ($)
The most liquid of all the current assets, this includes currency, and deposit accounts at banks and other financial institutions.
Marketable Securities ($)
This category of current assets includes marketable securities that are bought and sold in less than 12 months and provide a potential source of income.
Accounts Receivable ($)
This is money owed to the company by its customers, but not yet paid.
These are assets held in stock, which are to be sold to customers as part of normal business operations.
Prepaid Expenses ($)
This is the current portion of prepaid expenses, which have been paid in cash and are expected to be consumed over the next 12 months.
These next four inputs are current liabilities. Once again, this detail is found on the company's balance sheet.
Accounts Payable ($)
This is the value of the goods and services purchased by the company, but not yet paid to vendors and trade partners.
Income Taxes Payable ($)
These are state and federal income taxes owed and payable in the next 12 months.
Accrued Liabilities ($)
These are the company's obligations for goods and services but not yet paid. Accrued Liabilities are similar to accounts payable, except the invoice has not been received from the vendor.
Short-Term Debt ($)
This is debt held by the company, which is owed and payable to creditors in one year or less.
This is the total of Cash and Cash Equivalents, Marketable Securities, Accounts Receivable, Inventory, and Prepaid Expenses.
Removing Prepaid Expenses and Inventory from Current Assets provides the calculation of Quick Assets.
The current ratio measures a company's ability to pay its debt coming due in the next 12 months. Generally, a current ratio of 2.0 or higher is considered acceptable.
Quick Ratio (Acid Test)
Since inventory and prepaid expenses are removed from current assets, the quick ratio does not have to be as high as the current ratio. Generally, a quick ratio of 1.0 or higher is considered acceptable.
In addition to removing inventories and prepaid expenses, the cash ratio also removes accounts receivable from current assets. Financially sound companies, making good use of cash on hand, will have a cash ratio somewhere between 0.5 and 1.0.
Liquidity Ratios Calculator
Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.