Liquidity ratios: current ratio and quick ratio from Belgian annual accounts
Tips
The short answer
Liquidity ratios show whether a company can pay the debts that fall due within a year from assets that turn into cash within a year. The current ratio divides current assets by short-term debts; the quick ratio, also called the acid test, leaves stocks out. In Belgian annual accounts the National Bank calculates the current ratio as stocks and contracts in progress (code 3), receivables within one year (40/41), current investments (50/53), cash (54/58) and accrued income (490/1), divided by debts payable within one year (42/48) plus accrued charges (492/3). The quick ratio is 40/41 + 50/53 + 54/58 divided by 42/48. The heading "current assets" (29/58) is not the right numerator: it also contains receivables after more than one year (29). A current ratio below 1 means short-term debts exceed current assets.
The codes come from the National Bank's standard models for companies (full, abbreviated and micro) and its ratio definitions for companies, read on 1 October 2026. This is general information, not accounting or financial advice.
What the current ratio and quick ratio measure
Both ratios compare what a company can turn into cash within twelve months with what it has to pay within twelve months. The National Bank calls them liquidity in the broad sense (current ratio) and liquidity in the narrow sense (quick ratio). The difference is stock. Stock still has to be sold and collected, possibly below book value. The quick ratio asks the harder question: if sales stopped tomorrow, would receivables and cash cover the short-term debts?
The formulas in Belgian codes
Current ratio = (3 + 40/41 + 50/53 + 54/58 + 490/1) / (42/48 + 492/3)
Quick ratio = (40/41 + 50/53 + 54/58) / 42/48
Code | Balance sheet line | Current ratio | Quick ratio |
|---|---|---|---|
29 | Amounts receivable after more than one year | Left out | Left out |
3 | Stocks and contracts in progress | Numerator | Left out |
40/41 | Amounts receivable within one year (trade 40, other 41) | Numerator | Numerator |
50/53 | Current investments | Numerator | Numerator |
54/58 | Cash at bank and in hand | Numerator | Numerator |
490/1 | Deferred charges and accrued income | Numerator | Left out |
42/48 | Amounts payable within one year | Denominator | Denominator |
492/3 | Accrued charges and deferred income | Denominator | Left out |
Every one of these lines appears on the full, abbreviated and micro models. Unlike margin ratios, which need turnover that small companies may leave out, liquidity can be calculated for almost every company that files. Many tools use the shortcut 29/58 divided by 42/48. That is close enough when code 29 is small, but a long-term loan to a customer or a related company sits in 29 and inflates the shortcut. Whichever version you use, keep it the same across companies and years; the financial health check uses the same current ratio next to solvency and profitability.
How to read them
Current ratio below 1: short-term debts are larger than everything that should turn into cash within a year. Not fatal, but the company depends on new sales, its bank or its shareholders to pay on time.
Quick ratio around 1: receivables and cash alone cover the short-term debts, without selling any stock.
A wide gap between the two: the company's liquidity rests on stock. Fine with fast-moving goods, worrying with slow or seasonal stock.
The direction: a current ratio drifting from 1.5 to 1.1 over three years says more than any single value.
The sector: a cash retailer and a construction company have structurally different ratios. The National Bank uses these definitions in its sector statistics, the right comparison base.
A worked example
An illustrative Aalst wholesaler of building materials files the abbreviated model and closes its year on 31 December:
Line | Code | Amount |
|---|---|---|
Receivables after more than one year (loan to a customer) | 29 | €60,000 |
Stocks | 3 | €900,000 |
Receivables within one year | 40/41 | €1,100,000 |
Current investments | 50/53 | - |
Cash at bank and in hand | 54/58 | €140,000 |
Accrued income | 490/1 | €20,000 |
Current assets (heading) | 29/58 | €2,220,000 |
Debts payable within one year, of which €300,000 owed to the parent company | 42/48 | €1,700,000 |
Accrued charges | 492/3 | €30,000 |
Current ratio (National Bank): (900,000 + 1,100,000 + 140,000 + 20,000) / (1,700,000 + 30,000) = 2,160,000 / 1,730,000 = 1.25.
Shortcut: 2,220,000 / 1,700,000 = 1.31. The loan in code 29 and the accruals flatter it slightly.
Quick ratio: (1,100,000 + 140,000) / 1,700,000 = 0.73. Without selling stock, the company covers about three quarters of its short-term debts.
Without the parent's debt: if the group will not call that 300,000 euros, the quick ratio is 1,240,000 / 1,400,000 = 0.89. If it will, 0.73 is the real figure.
The pitfalls
Seasonality. The balance sheet is a picture of one day. A garden centre closing on 31 December shows little stock and an empty order book; the same company in March looks very different.
Intra-group debts. Short-term debts to a parent or sister company count in 42/48 like any other debt, although groups often roll them over. Only the full model splits them out: note 6.15 shows receivables from affiliated enterprises within one year (9311) and debts to them within one year (9371). On the abbreviated and micro models you cannot see the split.
Cash pooling. In a group cash pool a subsidiary's cash is swept to a central account. Its own cash line (54/58) can then be close to zero while the money sits as a receivable on, or a debt to, the group. A low cash figure in a group company says little until you know how the pool works and how solid the group is.
Long-term debt falling due. Code 42 is the part of long-term loans that matures within the year. A loan repaid in one go can push the ratio below 1 for one year, which usually signals refinancing rather than distress.
Stock quality. Stock is booked at cost, not at what it would fetch today. Write-downs on stocks (631/4 in the income statement) hint at slow movers.
Age. Accounts can be filed up to seven months after year end. How to look up Belgian annual accounts shows where to find the latest filing.
What a supplier should look at
Before delivering on 30 or 60 day terms, check in this order:
The quick ratio over several years, not just the latest one.
Cash (54/58) against short-term financial debts (43). A company that funds its daily operations on an overdraft has little room when the bank tightens.
Trade debts (44) against the balance sheet total. Trade debts growing faster than the business suggests it is financing itself on its suppliers, which means on you.
Overdue tax and social security debts. All three models disclose overdue tax debts (9072) and overdue debts to the National Social Security Office (9076) in the notes. Any amount there deserves a question.
Your own payment experience. A customer that starts paying later is the most current signal you have; credit management and DSO covers how to track it. The wider pattern of warning signs is in how to spot a customer in financial trouble.
Liquidity, working capital and solvency
The current ratio has a sibling in euros: net working capital, current assets minus short-term debts. A ratio of 1.25 can mean 50,000 or 5 million euros of buffer, so read both; working capital in Belgian accounts explains the calculation and the working capital requirement. Liquidity is about the next twelve months. Solvency, equity against total assets, is about whether the company can absorb a loss over several years; a liquid company with negative equity and an illiquid one with strong equity are different risks. The solvency ratio covers that side.
Four years of liquidity at a glance
Working out two ratios by hand is fine for one company, not for every customer in your ledger. Bizzy shows, on each Belgian legal entity's Financials tab, a liquidity block built from the accounts filed with the National Bank: cash, net working capital, current ratio and quick ratio for four years, with the change from year to year and the filed PDF per year, so you can check the source lines yourself. You can start for free; the plans are on the pricing page.
Frequently asked questions
What is the difference between the current ratio and the quick ratio? The quick ratio leaves out stocks (code 3) and accruals, so it only counts receivables, current investments and cash against short-term debts. It is the stricter test.
Is the acid test the same as the quick ratio? Yes. Acid test, quick ratio and liquidity in the narrow sense are three names for the same ratio.
Can I calculate liquidity ratios for a micro company? Yes. All the codes involved (3, 40/41, 50/53, 54/58, 490/1, 42/48, 492/3) are on the micro model. Turnover is not needed.
What is a good current ratio? Below 1 means short-term debts exceed current assets. Above that there is no official threshold; compare with the sector and with the same company's earlier years.
Photo: the Meuse at Huy with the collegiate church and the fort, Michielverbeek, CC BY-SA 4.0, via Wikimedia Commons