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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...
Apr 25, 2024 · Learn how to use the current ratio, a liquidity metric that measures a company's ability to pay its short-term debts, by dividing its current assets by its current liabilities. Find out what a good current ratio is, how it differs from other ratios, and how it can help you evaluate a company's financial health.
- Lydia Kibet
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.
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. It is also known as working capital ratio. A current ratio of one or more is preferred by investors.
- The formula for the current ratio is: Current Ratio = Current Assets / Current Liabilities
- 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...
May 25, 2021 · A higher current ratio indicates that a company is able to meet its short-term obligations. In the example above, if all of Company XYZ's current liabilities were due on January 1, 2021, the firm would be able to meet those obligations with cash.
Apr 3, 2024 · Learn how to calculate the current ratio, a measure of a company's ability to pay its short-term debts, and see examples of high and low current ratios. Compare the current ratio with other liquidity and solvency ratios and understand its limitations.
