What is a good EBITDA margin for a small business?

Most healthy small businesses run an EBITDA margin between 10% and 20%. Service businesses and SaaS often run higher (20–35%+), while restaurants and retail typically run 10–15%. CFO Grade compares your EBITDA margin to industry-specific benchmarks across 16 sectors.

What DSCR do lenders look for?

Most SBA and commercial lenders require a Debt Service Coverage Ratio (DSCR) of at least 1.25x. Construction surety bonds often require 1.5x or higher. A DSCR below 1.0x means your EBITDA does not cover your annual debt payments.

How does CFO Grade calculate the letter grade?

CFO Grade scores 24+ financial ratios across profitability, liquidity, leverage, and efficiency — weighted by industry. The composite score maps to a letter grade from A+ to F. The full methodology and benchmark sources are described in the report and the disclaimer page.

Yes. The full analysis, 24+ ratios, letter grade, and industry benchmarks are completely free with no signup. Optional paid features include a $9 PDF export and a $19 Pro Pass with AI-generated CFO memo and 30 days of unlimited PDFs.

Do I need to create an account?

No account is required. Your numbers stay on your device unless you explicitly opt in to anonymized peer benchmarking. Pro entitlements are bound to your device with a restore link you can email yourself.

Is CFO Grade financial advice?

No. CFO Grade provides educational insights for business owners and analysts. It is not financial, tax, legal, or investment advice. Always verify the output with a qualified professional before making business decisions.

Liquidity

Quick Ratio (Acid-Test Ratio)

Short answer

Quick Ratio (also called the Acid-Test) is cash + receivables + marketable securities divided by current liabilities. Unlike Current Ratio, it excludes inventory — so it answers a stricter question: could you pay every short-term obligation today without selling product?

Worth quotingBanks routinely covenant Quick Ratio ≥ 1.0× for commercial credit lines — falling below can trigger a technical default even if revenue is growing.

Formula

Quick Ratio = (Current Assets − Inventory) / Current Liabilities

Take current assets, subtract inventory, then divide by current liabilities. This shows whether you can pay short-term bills without selling product.

Why it matters

For inventory-heavy businesses (retail, e-commerce, manufacturing) the current ratio can look fine while the business is actually cash-poor. Quick ratio strips that out and shows the truth.

Benchmarks

Strong≥ 1.5×

Healthy1.0–1.5×

Tight0.5–1.0×

Risk< 0.5×

Common questions about Quick Ratio (Acid-Test Ratio)

What is the quick ratio?+

Quick Ratio = (Cash + Receivables + Marketable Securities) ÷ Current Liabilities. It measures whether a business can pay every short-term obligation immediately, without selling inventory.

What is a good quick ratio?+

1.0× or higher is the institutional benchmark — it means liquid assets fully cover current liabilities. Capital-intensive businesses (manufacturing, distribution) often run below 1.0 because inventory is the biggest current asset. Service businesses should clear 1.0× comfortably.

Quick ratio vs current ratio — what's the difference?+

Current Ratio includes inventory in current assets. Quick Ratio excludes it. Quick Ratio is the stricter test because inventory may not convert to cash quickly — especially in retail, restaurants, or seasonal businesses.

Why do lenders use the quick ratio?+

Quick Ratio strips out inventory and prepaid expenses, leaving only assets that are truly liquid within 90 days. For working-capital revolvers, banks want to see real cash + AR available — not inventory that might sit unsold for months.

See your business's quick ratio (acid-test ratio).

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Related concepts

Current Ratio Working Capital Cash Conversion Cycle