Current Ratio, Quick Ratio (Acid-Test), and Net Working Capital (NWC)

State the included assets and liabilities

Current ratio divides current assets by current liabilities; total working capital subtracts the latter from the former. These are balance-sheet measures, not proof that obligations can be met on time.

For this simplified example, quick assets are cash and receivables. There are no separate marketable securities. Receivable collectibility and asset availability still matter.

The operating NWC example is defined as receivables plus inventory plus prepaids, less payables and accrued expenses. It excludes cash and short-term debt. Transaction agreements and operating models can define included accounts differently; this is not a universal GAAP or acquisition rule.

All monetary inputs use the same unit, thousands. A zero or negative current-liability denominator is flagged rather than presented as a meaningful liquidity ratio.

Current Ratio, Quick Ratio, and Operating NWC formulas

Operating NWC isolates working capital tied up in customer receivables, stock, and vendor payables.

=(B2 + C2 + D2) - (E2 + F2)

Quick (Acid-Test) Liquidity Ratio

The seeded model includes cash in A2 and receivables in B2, with current liabilities in E2:G2.

=IF(SUM(E2:G2)<=0,"Check current liabilities",ROUND((A2 + B2) / (E2 + F2 + G2), 2))

Current ratio

Includes all four current-asset categories shown in this simplified model.

=IF(SUM(E2:G2)<=0,"Check current liabilities",ROUND((A2 + B2 + C2 + D2) / (E2 + F2 + G2), 2))

Total working capital

Current assets less current liabilities.

=SUM(A2:D2)-SUM(E2:G2)

Further reading

• Microsoft Support — ROUND function