Current Ratio (CR) vs Quick Ratio (QR)
Both ratios measure short-term liquidity — the ability to pay current liabilities with current assets. The difference is that the quick ratio excludes inventory and prepaid assets, making it the more conservative, cash-focused measure. Together they reveal whether liquidity depends on converting inventory.
At a Glance
Current Ratio (CR)
Current assets divided by current liabilities
Quick Ratio (QR)
Liquid assets divided by current liabilities
Key Differences
- Quick ratio = (Cash + Receivables) / Current Liabilities; current ratio includes inventory.
- A large gap between the two indicates significant inventory or prepaid balances.
- Both ratios should be ≥ 1.0 for basic liquidity comfort; benchmarks vary by industry.
- Quick ratio is called the 'acid-test' ratio — a strict test of immediate solvency.
When to Use Each
Use Current Ratio (CR) when…
Use the current ratio for a broad liquidity snapshot and for industries where inventory is liquid and easily convertible to cash.
Full Current Ratio guide →Use Quick Ratio (QR) when…
Use the quick ratio for manufacturing, retail, and other inventory-heavy businesses where stock can take weeks or months to sell.
Full Quick Ratio guide →Formulas
CURRENT RATIO (CR)
Current Ratio = Current Assets / Current Liabilities
QUICK RATIO (QR)
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
(Cash + Accounts Receivable) / Current LiabilitiesCharts
Current Ratio (CR)
Quick Ratio (QR)