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How to calculate quick ratio in excel

February 11, 2022
5.1K Views

Are you ready to master how to calculate quick ratio in excel? After learning this WPS free course, you will be advanced from a beginner in WPS Spreadsheet.

· What is quick ratio?

According to Wikipedia, In finance, the quick ratio, also known as the acid-test ratio is a type of liquidity ratio, which measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately.

Specifically,

Current Assets: In simple words, assets which are held for a short period are known as current assets. Typical current assets include cash, accounts receivable, inventory, prepaid expenses and marketable securities.

Current liabilities: Current liabilities are obligations that will be settled by current assets or by the creation of new current liabilities.Typical current liabilities include accounts payable and accrued expenses.

· What is difference between current ratio and quick ratio?

We have learned how to get the current ratio in previous tutorial.

And it is clear that they both can tell a company’s short-term liquidity, or the ability to pay off the debts. But what are the differences between them?

As you can see from the formulas, to get the quick ratio, you need to minus inventory and prepaid expenses. By doing so, the current assets can quickly be converted into cash, as its name suggests.

Inventory and prepaid expenses are excluded because it takes too long to convert to cash and pay for the liability.

· Example to calculate the quick ratio in WPS Presentation

Without further ado, let’s look at today’s example.

Suppose we want to get the quick ratio of company A and company B.

1. Click cell B8 where we want to calculate the liquid assets of company A. Enter =SUM(B3:B5). This function helps us add up the values of cell B3 to cell B5.

Note: Inventory and prepaid expenses are excluded as the formula required.

2. Similarly, enter =SUM(C3:C5) in cell C8. Here, we get the liquid assets of these two companies.

3.  Likewise, to get the total current liabilities, just enter=SUM(B11:B12) in cell B13 and =SUM(C11:C12) in cell C13.

4. Finally, as we all know the formula of the quick ratio is: Liquid Assets / Current Liabilities. Enter =B8/B13 in cell B15 and =C8/C13 in cell C15.

We can learn that the quick ratio of company A is 1.0 and that of company B is 1.2. The higher the ratio result, the better a company's liquidity and financial health. So a higher current rate and a better financial situation is seen at company B.

In today's free WPS Office tutorial, we have learned a simple yet useful way to calculate current ratio in excel. WPS Spreadsheet, similar to Microsoft Excel,is avaliable for Windows, PC, Mac, Linux, Android, and iOS devices.

· To explore more about WPS Office:

Click here to learn how to use SUM function to quickly calculate the sum.

Did you get it?

WPS Office Spreadsheet is helpful for various fields of studies: mathematics, statistics, data science, engineering, finance, and such. Rich functions paired with teaching procedures, WPS Office Spreadsheet definitely is a professional and reliable toolkit.

15 years of office industry experience, tech lover and copywriter. Follow me for product reviews, comparisons, and recommendations for new apps and software.