Liquidity Ratios Explained: Current, Quick, and Cash
How current ratio, quick ratio, and cash ratio measure your ability to pay short-term obligations — with US GAAP context for lenders and investors.
Current ratio
Current Assets ÷ Current Liabilities. Above 1.0 suggests you can cover short-term debts. Many lenders prefer 1.5–2.0 for operating companies.
Quick ratio (acid-test)
(Cash + Marketable Securities + Accounts Receivable) ÷ Current Liabilities. Excludes inventory — useful for businesses with slow-moving stock.
Cash ratio
Cash and Cash Equivalents ÷ Current Liabilities. The strictest test; critical for startups and seasonal businesses between funding rounds.
Using ratios in practice
Pull asset and liability balances from a reconciled chart of accounts and balance sheet. Pemabu aggregates checking, savings, and investment cash against credit cards and short-term loans.
Generate a balance sheet and liquidity snapshot