Quick ratio vs cash ratio
The cash ratio is the strictest of the three liquidity ratios. Here is what it adds, when lenders demand it, and how a healthy band differs from the quick ratio.
The cash ratio includes only cash and marketable securities in the numerator. The quick ratio adds accounts receivable. Cash ratios are materially stricter because receivables can be slow-paying, contested, or written off. A cash ratio above 0.5 is considered strong for most non-financial firms; below 0.2 raises concerns about meeting short-term obligations from on-hand funds alone.
Verified June 2026. Source: Corporate Finance Institute, Quick Ratio Definition. Cross-referenced with Subramanyam 11th Ed. Ch. 10 (pp. 499-505).
Side-by-side formulas
(Cash + Marketable Securities + Accounts Receivable) / Current Liabilities
Includes near-cash assets receivable within ~90 days.
(Cash + Marketable Securities) / Current Liabilities
Strips receivables. Measures only what is already in the bank.
When the cash ratio matters more
- Customer concentration risk. If 40 percent of receivables come from one customer, a single payment delay can wipe out apparent liquidity. The cash ratio shows what is left.
- Aged AR. Receivables outstanding more than 90 days are likely to be partially uncollectable. The cash ratio sidesteps that assumption.
- Recession stress test. Banks model AR collection rates dropping 20 to 40 percent during downturns. The cash ratio is the conservative anchor.
- Distressed-debt analysis. Restructuring teams discount AR aggressively. The cash ratio is often the first liquidity figure they cite.
Healthy bands by ratio
| Band | Quick ratio | Cash ratio |
|---|---|---|
| Strong | ≥ 1.5 | ≥ 0.5 |
| Healthy | 1.0 to 1.5 | 0.3 to 0.5 |
| Tight | 0.7 to 1.0 | 0.2 to 0.3 |
| Stressed | < 0.7 | < 0.2 |
Verified June 2026. Source: Subramanyam, Financial Statement Analysis, 11th Edition (pp. 499-505). Bands are general-purpose. Industry-specific bands override these. See sector benchmarks..
Quick ratio vs current ratio
Add inventory back in. When the gap matters.
Credit analysis
How credit analysts stack the three ratios.