# Liquidity Ratio Analysis

Liquidity ratios are most useful when they are used in comparative form. Some of the most commonly used liquidity ratios - Current Ratio, Quick Ratio and Net Working Capital Ratio. Select a ratio calculator and key in the required values to get the desired result:

1. ##### Current Ratio Calculator
Current ratio is used to measure a company's ability to pay off its short-term liabilities with its current assets. Try now…

How to calculate?
Formula: Current Ratio = Current Assets/Current Liabilities.
This is a balance sheet component; the values are commonly stated against current assets and current liabilities.

Current Assets:
This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short term.

Current Liabilities:
This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

Example:
Current ratio for a company with a total current assets of \$200,000 and current liabilities of \$155,000 is 1.29 : 1. It means \$1.29 of current assets are available to cover each \$1 of its current liabilities.
2. ##### Quick Ratio Calculator
Quick ratio is used to identify how much liquid cash is readily available with a company to meet its current liabilities. Try now…

How to calculate?
Formula: Quick Ratio = Quick Assets/Current Liabilities
This is a balance sheet component; the values are commonly stated against current assets and current liabilities.
Note:
Quick Assets = total current assets value - total inventory and any current prepaid assets value.

Quick Assets:
Quick assets are current assets that can be converted to cash in short-term. Simply subtract inventory and any current prepaid assets from the current asset total.

Current Assets:
This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short term.

Inventory:
Inventory is the finished goods that can be sold immediately.

Current Liabilities:
This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

Example:
Quick ratio for a company with a total current assets of \$240,000, merchandise inventory of \$40,000 and current liabilities of \$105,000 is 1.9 : 1. It means \$1.9 of quick assets available to cover each \$1 of short-term debt (current liabilities).
3. ##### Net Working Capital Ratio Calculator
Net working capital ratio is used to track the proportion of short term net funds to assets, usually on a trend line. Try now…

How to calculate?
Formula: Net Working Capital Ratio = Net Working Capital/Total Assets
This is a Balance Sheet component; the values are commonly stated against Current Assets, Current Liabilities and Total Assets.
Note:
Net Working Capital = total current assets - total current liabilities.
It is a liquidity calculation that measures a company’s ability to pay off its current liabilities with current assets.

Current Assets:
This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short term.

Current Liabilities:
This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

Total Assets:
Total assets are the sum of all current and noncurrent assets that a company owns.

Example:
Net working capital ratio for a company with a total current assets of \$180,000 , current liabilities of \$85,000 and total assets of \$220,000 is 0.43 : 1. It means 43% of totals assets are in the form of short-term assets (Net working capital – liquid funds).