The current ratio is a liquidity ratio that measures a company’s ability to cover its short-term obligations with its current assets. Learn how it is used.
The current ratio is liquidity and efficiency ratio that calculates a firm's ability to pay off its short-term liabilities with its current assets. The current ratio is an important measure of liquidity because short-term liabilities are due within the n
Why Use the Current Ratio Formula? This current ratio is classed with several other financial metrics known as liquidity ratios. These ratios all assess the operations of a company in terms of how financially solid the company is in relation to its outstanding debt. Knowing the current ratio is...
Current ratio, also known as liquidity ratio and working capital ratio, shows the proportion of current assets of a business in relation to its current liabilities. Formula Explanation Current ratio expresses the extent to which the current liabilities of a business (i.e. liabilities due to be s...
Current ratio formula & calculation The formula to calculate the current ratio of a company is Current ratio formula = Current Assets / Current Liabilities Example using the current ratio Let us understand the calculation of the current ratio with the help of the below example: These are financi...
Current ratio is a liquidity ratio which measures a company's ability to pay its current liabilities with cash generated from its current assets. It equals current assets divided by current liabilities.
Formula This liquidity ratio can be arrived at by simply dividing a business’s current assets by its current liabilities, as in the following example: Current Assets Ratio= Current Assets / Current Liabilities This ratio is also known as the current assets ratio, and sometimes it's referred to...
Current Ratio Formula To calculate current ratio, you’ll need the firm’sbalance sheetand the following formula: Current Ratio Example Let's look at the balance sheet for Company XYZ: We can calculate Company XYZ's current ratio as: 2,000 / 1,000 = 2.0 ...
Current ratio is a vital liquidity ratio. It measures the liquidity position of a company. It is useful to internal finance manager, lenders, banks, etc.
Formula: Current assets / current liabilities For example, a firm with current assets amounting to $10 million and current liabilities of $5 million can have a current ratio of 2.0. Note:In terms of current ratio, 1.0 or above indicates that the company is well-placed to cover its short-...