Learn about current ratio in accounting with a simple example. You can also learn other important accounting terms from Zoho Books' accounting dictionary.
What is the current ratio? What is the difference between the current ratio and the acid test ratio? What are accounting ratios? What is the difference between the current ratio and the quick ratio? What is a liquidity ratio? What is the quick ratio?
The current ratio for Food and hangout outlets is 2, meaning they have enough assets to pay back their current liabilities. It shows that the Food & Hangout outlet’s business is less leveraged and has negligible risk. Banks always prefer a current ratio of more than 1, so the current ass...
What is the difference between the current ratio and the acid test ratio? What are accounting ratios? What is the difference between the current ratio and the quick ratio? What is a liquidity ratio? What is the quick ratio? What is the working capital ratio? Related In-Depth Expla...
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
Define the following term: Current ratio. What are long-term liabilities? Give some examples. What liability does not require a payment of cash? Under what conditions should a short-term debt not be included under current liabilities? Explain what a responsibility center generally in accounting ref...
The coinsurance clause will only be in effect at the event ofpropertyloss. During a loss, the insurance limit and the required amount to be used for insurance based on the coinsurance percentage are compared and must have a ratio equal to or greater than one, else, a penalty will be given...
Current ratio = 60 million / 30 million = 2.0x The business currently has a current ratio of 2, meaning it can easily settle each dollar on loan or accounts payable twice. A rate of more than 1 suggests financial well-being for the company. There is no upper end on what is “too mu...
In this example, the trend for Company B is negative, meaning the current ratio is decreasing over time. An analyst or investor seeing these numbers would need to investigate further to see what is causing the negative trend. It could be a sign that the company is taking on too much debt...
In short, a company needs to generate enough revenue and cash in the short term to cover its current liabilities. As a result, manyfinancial ratiosuse current liabilities in their calculations to determine how well—or for how long—a company is paying down its short-term financial obligations...