This guide explains a practical choice of inputs, a worked example and the assumptions behind the linked tools.
Start with a common balance-sheet date
Use assets and liabilities measured on the same date and in the same currency. Current liabilities are obligations classified as current under your accounting policy. A ratio assembled from unrelated months can hide timing problems rather than reveal liquidity.
Narrow the numerator step by step
Suppose cash is 20,000, securities 10,000, receivables 50,000, inventory 70,000 and current liabilities 100,000. Current assets total 150,000, giving a current ratio of 1.5. Removing inventory gives quick assets of 80,000 and a quick ratio of 0.8. Cash plus securities gives a cash ratio of 0.3.
Review quality as well as the number
These measures do not establish an ideal ratio for every business. Receivables can be overdue, inventory obsolete and cash restricted. Compare trends, seasonal patterns and cash-flow timing. Use the receivables aging allowance tool to explore supplied loss estimates without treating its example rates as accounting rules.
Worked example
Scroll the table horizontally on small screens to see every column.
| Measure | Numerator | Ratio |
|---|---|---|
| Current | 150,000 | 1.5 |
| Quick | 80,000 | 0.8 |
| Cash | 30,000 | 0.3 |
Illustrative balance sheet only. Classifications and restrictions must follow the applicable accounting policy.
Sources and checks
Examples are illustrative and can be checked with the linked tools. Read each tool’s assumptions before applying its result. How we verify methods.