Liquidity Ratios Calculator
Calculator Use
This calculator will find solutions for up to four measures of the liquidity of a business or organization - current ratio, quick ratio, cash ratio, and working capital. The calculator can calculate one or two sets of data points, and will only give results for those ratios that can be calculated based on the inputs provided by the user.
- If you are analyzing one company over a single reporting period, fill in the known data points in column A and press calculate - the results will display below.
- If you are analyzing two companies or a single company over two reporting periods, use both column A (primary) and B (secondary). For each data point and ratio that has a value in both columns, the change expressed as a percent increase or decrease will also be calculated.
The significant figures drop select box only determines rounding for the ratios themselves. Percent changes are always calculated to four significant figures.
Calculations Used in this Calculator
- Current Ratio = current assets ÷ current liabilities
- Quick Ratio = (current assets - inventory) ÷ current liabilities
- Cash Ratio = (cash + cash equivalents) ÷ current liabilities
- Working Capital = current assets - current liabilities
Input Definitions
- Current Assets
- Short term assets that, either immediately or within twelve months, can be readily converted into cash as profit, to pay debt or current expenses.
- Current Liabilities
- Short term liabilities that are due now or will become due within twelve months. This includes operating expenses, supplies and materials, loans coming due within the current year, etc...
- Inventory
- Products that a company has purchased or produced and expects to sell.
- Cash
- Includes physical cash on hand as well as money in bank accounts that can be readily accessed.
- Cash Equivalents
- Low risk investments that are 3 months or less from maturity. Examples include money market holdings, treasury bills, preferred stock (not common stock) acquired shortly before maturity, and certain types of bonds.
Ratio Definitions
- Current Ratio
- Measures a company's ability to meet short term obligations. Most encompassing ratio, includes all current assets, including both inventory and accounts receivable.
- Quick Ratio
- A more conservative calculation of a company's ability to meet short term obligations. Accounts receivable is included, however inventory is left out, generally being seen as less liquid as other types of assets and may be sold on Net-30.
- Cash Ratio
- The most conservative method of measuring a company's ability to meet short term obligations, excluding both inventory and accounts receivable. The rationale is that unlike cash equivalents, which can be converted to cash in relatively short order, inventory and accounts receivable, while current assets may require considerable time and expense to be liquefied.
- Working Capital
- Shows current assets a company has to work with. A high working capital number can still mean that a company has a shortage or low amount of cash.