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Feb 20, 2024 · Learn how to calculate the current ratio, a liquidity measure that compares a company's current assets to its current liabilities. Find out what a high or low current ratio means and how it varies across industries.
- Jason Fernando
- 1 min
Jun 8, 2023 · The current ratio or working capital ratio is a ratio of current assets to current liabilities within a business. In other words, it is defined as the total current assets divided by the total current liabilities. The current ratio is one of the oldest ratios used in liquidity analysis.
- The current ratio is an evaluation of a company's short-term liquidity. In simplest terms, it measures the amount of cash available relative to its...
- There are several methods for calculating this ratio. Companies can divide the total value of its current assets by the total value of its current...
- The higher the number, the more liquid and/or stable a company. A low current ratio may indicate the company is not able to cover its current liabi...
- The prevailing view of what constitutes a "good" ratio has been changing in recent years, as more companies have looked to the future rather than j...
- Working Capital is the difference between current assets and current liabilities. A business' liquidity is determined by the level of cash, marketa...
The current ratio (also known as the current asset ratio, the current liquidity ratio, or the working capital ratio) is a financial analysis tool used to determine the short-term liquidity of a business.
May 25, 2021 · What Does a Higher Current Ratio Mean? A company with a current ratio of between 1.2 and 2 is typically considered good. The higher the current ratio, the more liquid a company is.
Apr 16, 2023 · The current ratio is a liquidity ratio that is used to calculate a company's ability to meet its short-term debt and obligations, or those due in a single year, using assets available on its balance sheet.
- The formula for the current ratio is: Current Ratio = Current Assets / Current Liabilities
- A current ratio of one or more is preferred by investors.
- For example, if a company has $100,000 in current assets and $150,000 in current liabilities, then its current ratio is 0.6.
- Current ratios are not always a good snapshot of company liquidity because they assume that all inventory and assets can be immediately converted t...
The current ratio, also known as the working capital ratio, measures the capability of a business to meet its short-term obligations that are due within a year. The ratio considers the weight of total current assets versus total current liabilities .
Apr 18, 2024 · The current ratio formula is the current assets of a company divided by its current liabilities. A current ratio of around 1.5x to 3.0x is considered to be healthy, whereas a current ratio below 1.0x is deemed a red flag that implies the near-term liquidity of the company presents risks.
