What's the current ratio?
submitted by Ron2K

Kenny8

Current Ratio = Current Assets / Current Liabilities

MamboJ

A company can use their current ratio to decide whether or not to get a loan. It helps you see if you can pay off your debt within a year.

Ideally, a 2:1 ratio is preferred.

Yubyub

It's a way to measure short-term liquidity. As a quick example, if a company has $50,000 in current assets and $35,000 in current liabilities, the current ratio would be 1.42. In other words, for every dollar you owe somebody else, you've got $1.42 of cash.

Wikket

The current ratio gives you a sense of the financial stability of a business. It gives you a rough idea of how close they are from bankruptcy.

If a company has a current ratio of 1, they're in bad shape. If all their debts came due at once, that means they would only have enough money to pay the debt and nothing leftover. Hence, the higher the current ratio, the better off they are. A high ratio would show the have plenty of resources to pay off their debt.

S.Crumb

Here's a shortcut:

Current Ratio Calculator

Just plug your numbers in there.