 The asset test ratio, which is sometimes called the quick ratio, tells us whether an entity could pass the asset test of paying off its current liabilities if they all came due immediately. The asset test ratio is a measure of liquidity. The formula is cash plus short-term investments plus net accounts receivable divided by current liabilities. Notice that the current assets that don't turn to cash, like supplies and other prepaid expenses, or might slowly turn to cash, like inventory, are excluded from the numerator. Here is the current asset and liability section of a sample company's balance sheet. We'll use the highlighted current assets and liabilities to determine the asset test ratio. For 2015, cash, short-term investments, and net AR divided by current liabilities gives us an asset test ratio of 0.81, which is pretty good. For 2016, cash, short-term investments, and net AR divided by current liabilities gives us an asset test ratio of 1.19. Generally ratios greater than 1.0 are considered strong.