Current Ratio vs Quick Ratio
The current ratio counts inventory among the assets available to pay short-term bills; the quick ratio strips inventory out and counts only the most liquid assets.
The difference
Both ratios ask the same broad question — can this company cover the bills that come due within a year? — but they disagree about what counts as available to pay them. The current ratio divides all current assets by current liabilities, so inventory sitting in a warehouse is treated as usable coverage. The quick ratio, also called the acid-test ratio, subtracts inventory and prepaid expenses first, leaving cash, marketable securities, and receivables. That makes the current ratio the looser test and the quick ratio the stricter one: the current ratio assumes inventory can be turned into cash in time, while the quick ratio assumes none of it sells. Neither is the correct one — they answer different questions, and the gap between them is itself the information, because it tells you how much of a company's short-term coverage depends on moving stock.
Side by side
| Aspect | Current Ratio | Quick Ratio |
|---|---|---|
| What it measures | Whether short-term assets cover short-term bills, inventory included | Whether the most liquid assets alone cover short-term bills |
| Formula | Current assets ÷ current liabilities | (Current assets − inventory) ÷ current liabilities |
| Inventory | Counted in full as a current asset | Excluded, along with prepaid expenses |
| How strict | The looser test; assumes inventory converts to cash in time | The stricter acid test; assumes no inventory sells at all |
| Reading it | Generally sits comfortably above 1, often around 1.5 to 2 | Around 1 means liquid assets just cover liabilities; healthy levels vary by industry |
| Cross-border wrinkle | IFRS vs US GAAP can shift current asset and liability totals modestly | Inventory valuation differs (IFRS bans LIFO), changing what gets excluded |
Which one to use
Reach for Current Ratio when…
The current ratio is the better lens when inventory genuinely turns over quickly and predictably, because in that case excluding it understates real coverage. It is also the more useful starting point for a broad first look at whether near-term debts can be met without new financing. And because it draws on every current asset, it captures the coverage the quick ratio deliberately leaves out — which is what you want when the question is whether the bills can be met at all, rather than whether they could be met without selling any stock.
Reach for Quick Ratio when…
The quick ratio is the better lens when inventory is slow-moving, seasonal, or of uncertain value — situations where counting it as coverage flatters the picture. It answers a narrower question: could the company meet short-term obligations even if it could not sell any stock? That framing matters most when you want to know what happens if the inventory does not move on schedule.
The common mistake is reading a comfortable current ratio of around 2 as proof of liquidity without checking what is inside it. If most of those current assets are inventory, the quick ratio can sit below 1 on the same balance sheet — meaning the company would need to sell stock or find new financing to cover near-term bills. People also compare the two numbers across companies as if they were interchangeable, when a retailer with heavy inventory and a software firm with almost none will show a wide gap for structural reasons, not because one is in trouble.
How Quintarthai uses them
Quintarthai lists both the current ratio and the quick ratio together in the Liquidity group of the Ratios tab on a company's deep-analysis page in /app/, so you can see side by side how much of a company's short-term coverage rests on inventory. You can also screen the North-American universe by these ratios in the Stock Screener. Both figures are shown for reference and education only — they are inputs to your own reading of a balance sheet, not a recommendation.