Financial Statement Analysis Magazine Section

Ratio - Current Ratio

ratioCURRENT RATIO:                                                                           onlinecalculator icon Online Current Ratio Calculator

This ratio is obtained by dividing the 'Total Current Assets' of a company by its 'Total Current Liabilities'. The ratio is regarded as a test of liquidity for a company. It expresses the 'working capital' relationship of current assets available to meet the company's current obligations. Therefore it is also known as the Working Capital.
When current assets equal current liabilities the ratio equals one. At this point the company has no working capital. A Current Ratio of over one means that the company has working capital. A ratio between 1.2 and 2 is deemed adequate. Anything over two can be argued as the company not being able to invest its excessive operational assets.

The formula:
Current Ratio = Total Current Assets/ Total Current Liabilities uses cookies to improve your online experience. These cookies are necessary for the website to function and cannot be switched off in our systems. Without this type of technology, our services will not work optimally or won't be able to provide certain features and functionalities. To find out more about our policy please click "More information". If you do not agree click "Decline". By clicking "Accept" below, you will be giving your consent to our cookie policy.
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