Quick ratio expectations by sector
Twelve sectors, each with the expected quick ratio band, the Damodaran working capital ratios that justify it, and the textbook rationale.
The expected band column is the range a financially healthy firm in that sector should fall inside. A figure inside the band is normal. A figure below the band is a yellow flag worth investigating alongside the cash conversion cycle. A figure above the upper bound is generally safe but can signal idle capital.
| Industry | Expected quick ratio | Inv / Sales | AR / Sales | Non-cash WC / Sales |
|---|---|---|---|---|
| Software (System and Application) | 1.2 to 2.5 | 0.46% | 16.84% | 10.05% |
| Computer Services | 1.0 to 2.0 | 8.12% | 21.30% | 13.40% |
| Retail (General) | 0.2 to 0.6 | 8.67% | 3.50% | -0.11% |
| Healthcare Products | 1.5 to 3.5 | 17.59% | 16.51% | 25.65% |
| Drugs (Pharmaceutical) | 1.5 to 3.0 | 15.61% | 21.80% | 32.09% |
| Construction Supplies | 1.0 to 2.0 | 20.95% | 14.83% | 22.56% |
| Auto and Truck | 0.7 to 1.2 | 9.91% | 6.30% | -2.96% |
| Restaurant and Dining | 0.3 to 0.8 | 2.17% | 5.32% | 2.79% |
| Hotel and Gaming | 0.4 to 1.0 | 2.62% | 10.36% | 0.77% |
| Telecom Services | 0.5 to 1.0 | 2.04% | 12.83% | -3.69% |
| Banks (Regional) | Not meaningful | 0.82% | 0.00% | 0.00% |
| Financial Services (Non-bank and Insurance) | Not meaningful | 0.36% | 1332.22% | 1186.00% |
Verified June 2026. Source: Damodaran NYU Stern, Working Capital Requirements by Industry Sector. US data, last update January 2026. Textbook anchor: Subramanyam, Financial Statement Analysis, 11th Edition, Chapter 10 (pp. 499-505).
Per-sector rationale
Software (System and Application)
1.2 to 2.5Software firms hold negligible inventory and sizeable accounts receivable. Healthy SaaS balance sheets typically show quick ratios above 1.0. Band triangulated from Damodaran AR-to-sales ratio.
Computer Services
1.0 to 2.0Services firms carry modest inventory and meaningful AR balances. Quick ratio runs near current ratio.
Retail (General)
0.2 to 0.6Inventory-heavy with low AR (cash and card sales). Quick ratio routinely below 1.0 for healthy retailers. Subramanyam Chapter 10 cites retail as a sector where a low quick ratio is normal.
Healthcare Products
1.5 to 3.5Long collection cycles and large inventory balances inflate working capital. Quick ratio typically well above 1.0.
Drugs (Pharmaceutical)
1.5 to 3.0Long R&D cycles, large AR and substantial inventory. Healthy pharma firms commonly show quick ratios above 1.5.
Construction Supplies
1.0 to 2.0Long-dated AR with high inventory balances. Quick ratio at or above 1.0 in healthy operating cycles.
Auto and Truck
0.7 to 1.2Negative non-cash working capital reflects strong supplier financing. Quick ratio commonly below 1.0.
Restaurant and Dining
0.3 to 0.8Restaurants run on negative cash conversion cycles (cash and card sales, supplier credit). Subramanyam Chapter 10 cites restaurants as a textbook low-quick-ratio sector.
Hotel and Gaming
0.4 to 1.0Minimal inventory, modest AR (mostly card-paid stays), low quick ratio typical.
Telecom Services
0.5 to 1.0Negative WC and strong supplier terms. Quick ratio typically below 1.0; investors lean on cash flow rather than liquidity ratios.
Banks (Regional)
Not meaningfulBanks do not use quick ratio for liquidity oversight. Damodaran reports non-cash WC / Sales as NA for the banks (regional) row. Regulators apply Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and CET1 capital instead.
Financial Services (Non-bank and Insurance)
Not meaningfulInsurance and asset-management balance sheets are dominated by investment float; quick ratio is not the relevant liquidity metric. Use solvency capital or risk-based capital ratios.
Why some sectors say "not meaningful"
Banks, insurers, and asset managers do not use the quick ratio. Their balance sheets are dominated by investment portfolios and customer deposits or float; regulators apply Liquidity Coverage Ratio, Net Stable Funding Ratio, and CET1 capital instead. Publishing a quick ratio band for these sectors would be misleading, so this site labels them "not meaningful" rather than guessing a number.