Quick ratio formula
Quick ratio can be calculated two ways
Quick Ratio = [Cash & equivalents + marketable securities + accounts receivable] / Current liabilities
Quick Ratio = [Current Assets – Inventory – Prepaid expenses] / Current Liabilities
SaaS Quick ratio
In the SaaS industry, investors often use quick ratio along with other key SaaS metrics to measure the growth efficiency. It helps gauge a company’s potential to improve their MRR in spite of churn.
SaaS Quick ratio = MRR added / MRR lost (MRR added = New MRR + Expansion MRR Lost MRR = Downgrade MRR + Cancellation MRR)
SaaS Quick ratio benchmark and interpretation
A quick ratio of 4 is considered healthy. But, having a lower quick ratio doesn’t necessarily scream danger. It is very subjective to the scale of the business. Quick ratio by itself can’t be the sole determinant of a company’s efficiency. It should be looked at in conjunction with CAC and LTV to get a better understanding of your operational and growth efficiency.