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Aug 16, 2024 · 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.
Current Ratio Formula. The Current Ratio formula is: Current Ratio = Current Assets / Current Liabilities. Example of the Current Ratio Formula. If a business holds: Cash = $15 million; Marketable securities = $20 million; Inventory = $25 million; Short-term debt = $15 million; Accounts payables = $15 million; Current assets = 15 + 20 + 25 = 60 ...
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.
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.
Jul 11, 2023 · Formula. Current ratio is computed by dividing total current assets by total current liabilities of the business. This relationship can be expressed in the form of following formula or equation: Above formula comprises of two components i.e., current assets and current liabilities.
Apr 16, 2023 · Current Ratio Definition. 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.
Current ratio = Current assets ÷ Current liabilities. Current assets include cash and cash equivalents, marketable securities, short-term receivables, inventories, and prepayments. Current liabilities include trade payables, current tax payable, accrued expenses, and other short-term obligations.
