Liquidity Ratio Calculator
Analyze your company's ability to meet short-term obligations
Calculate Liquidity Ratios
Current Assets
Current Liabilities
Total obligations due within one year (accounts payable, short-term debt, etc.)
Current Ratio
Measures overall liquidity position
Healthy liquidity with comfortable asset cushion
Well-balanced liquidity position for most industries
Quick Ratio (Acid-Test)
Measures immediate liquidity without inventory
Sufficient quick assets to cover current liabilities
Healthy liquidity position for most situations
Quick Assets: $115,000
Cash Ratio
Measures ability to pay with cash only
Strong cash position
Good balance between liquidity and cash deployment
Cash & Near Cash: $70,000
Example Calculation
Company Balance Sheet Example
Liquidity Ratio Calculations
Company has $1.88 in current assets for every $1 of current liabilities
Excludes inventory and prepaid expenses for more conservative measure
Most conservative measure using only cash and equivalents
Industry Benchmarks
Current Ratio
Quick Ratio
Cash Ratio
Note: Ideal ratios vary by industry. Manufacturing typically requires higher ratios than service businesses.
Liquidity Analysis Tips
Compare ratios against industry standards for context
Monitor trends over time, not just current values
Quick ratio is more conservative than current ratio
Very high ratios may indicate inefficient use of assets
Consider cash flow timing alongside ratios
Different industries have different optimal ranges
Understanding Liquidity Ratios
What are Liquidity Ratios?
Liquidity ratios measure a company's ability to pay off its short-term debts and obligations using its current assets. These ratios are crucial for assessing financial health and the risk of financial distress.
The Three Main Liquidity Ratios
- 1.Current Ratio: Most commonly used, includes all current assets
- 2.Quick Ratio: More conservative, excludes inventory and prepaid expenses
- 3.Cash Ratio: Most conservative, only includes cash and marketable securities
Liquidity Ratio Formulas
Current Ratio
Current Assets ÷ Current Liabilities
Quick Ratio
(Current Assets - Inventory - Prepaid) ÷ Current Liabilities
Cash Ratio
(Cash + Marketable Securities) ÷ Current Liabilities
Key Insight: Each ratio becomes progressively more conservative, providing different perspectives on liquidity strength.
When Ratios Are High
- • Strong ability to meet obligations
- • Financial stability and flexibility
- • May indicate excess idle assets
- • Could invest more efficiently
When Ratios Are Moderate
- • Balanced liquidity position
- • Efficient asset utilization
- • Normal for healthy businesses
- • Monitor trends regularly
When Ratios Are Low
- • Potential liquidity problems
- • Risk of defaulting on obligations
- • May need external financing
- • Requires immediate attention
Industry Variations
Optimal liquidity ratios vary significantly by industry. Understanding your industry's norms is essential:
Manufacturing & Retail
Typically require higher ratios (1.5-2.0) due to inventory needs and longer cash conversion cycles.
Service Industries
Can operate with lower ratios (1.0-1.5) as they have less inventory and faster cash cycles.
Related Finance Calculators
Current Ratio Calculator
Calculate current ratio for liquidity assessment
Quick Ratio Calculator
Analyze acid-test ratio without inventory
Cash Ratio Calculator
Measure liquidity using only cash assets
Working Capital Calculator
Calculate working capital for operations
Debt to Equity Calculator
Analyze financial leverage ratios
Operating Cash Flow Ratio
Measure cash flow coverage of liabilities