Current Ratio Calculator
This is an online current ratio calculator that helps you find the value of the current ratio, which is used to measure the liquidity of a company.
The current ratio is a liquidity ratio used across the industry to assess a company’s short-term obligations or those due within one year. In other words, it reflects a company’s ability to generate enough cash to pay off all its debts once they become due. It’s used globally as a way to measure the overall financial health of a company.
Calculating the current ratio
To calculate the ratio, analysts compare a company’s current assets to its current liabilities.
- Current assets listed on a company’s balance sheet include cash, accounts receivable, inventory and other assets that are expected to be liquidated or turned into cash in less than one year.
- Current liabilities include accounts payable, wages, taxes payable, and the current portion of long-term debt.
The formula to calculate the current ratio is as follows:
Current Ratio = Current Liabilities / Current Assets
- If a company with a current ratio that is lower than the industry average may indicate a higher risk of distress or default.
- If a company has a very high current ratio compared to their peer group, it indicates that management may not be using their assets efficiently.
Current Ratio Example
|Balanced sheet item||Company A||Company B|
|Cash and equivalents||$10,000||$45,000|
|Total current assets||$110,000||$110,000|
|Short-term notes payable||$55,000||$75,000|
|Total current liabilities||$125,000||$125,000|