Current Ratio Equals
The higher the ratio the more liquid the company is.
Current ratio equals. Interpretation of current ratios. The current ratio compares all of a company s current assets to its current liabilities. If a company has 2 75 million in current assets and 3 million in current liabilities its current ratio is 2 750 000 3 000 000 which is equal to 0 92 after rounding. If current assets current liabilities then ratio is greater than 1 0 a desirable situation to be in.
The current ratio is a liquidity and efficiency ratio that measures a firm s ability to pay off its short term liabilities with its current assets. If current assets current liabilities then ratio is equal to 1 0 current assets are just enough to pay down the short term obligations. The current ratio is 150 000 100 000 which is equal to 1 5. If the current assets of a company are more than twice the current liabilities then that company is generally considered to have.
If current assets current liabilities then ratio is less than 1 0 a problem situation at hand as the. The current ratio is a popular metric used across the industry to assess a company s short term liquidity with respect to its available assets and pending liabilities. The current ratio is an important measure of liquidity because short term liabilities are due within the next year. That means the company in question can pay its current liabilities one and a half times with its current assets.
What is the current ratio. These are usually defined as assets that are cash or will be turned into cash in a year or less and.