How Do You Calculate the Quick Asset Ratio?

Quick asset ratio can be calculated on a basic calculator, or by hand.

The quick asset ratio is most commonly referred to as the acid-test ratio. Its purpose is to serve as an indicator of a company's short-term liquidity. The goal of the test is to determine the overall health of a company along with that company's ability to meet its short-term obligations with only its most liquid assets. When reading a company's quick asset ratio number, the higher the number, the better the health of the company. The quick asset ratio can be calculated by solving the formula: (current assets minus inventories) all divided by current liabilities.

Instructions

1. Gather your company's financial statements.

2. Find the present value of your company's current assets. This number can be found by adding your company's cash, accounts receivable and notes receivable. Each figure can be found on your company's balance sheet.

3. Find the present value of your company's inventory. This number can be located on your company's inventory sheet.

4. Find the present value of your company's current liabilities. This number can be found under the liabilities section of the balance sheet.

5. Subtract the figure you got for the inventories from the figure you got for the current assets. Then take that result and divide it by the current liabilities figure. The formula looks like this: quick asset ratio = (current assets - inventories) / current liabilities.

References

• Net MBA: Financial Ratios