Current Ratio Calculator

The current ratio measures a company's ability to pay short-term obligations with short-term assets. A ratio above 1.0 means the company has more current assets than current liabilities, indicating it can meet its short-term financial obligations.

1. 1

   Step 1

   Enter total current assets (cash, receivables, inventory, prepaid expenses)

2. 2

   Step 2

   Input total current liabilities (payables, short-term debt, accrued expenses)

3. 3

   Step 3

   Calculator divides current assets by current liabilities

4. 4

   Step 4

   Ratio above 1.0 indicates positive liquidity

5. 5

   Step 5

   Higher ratios generally indicate better ability to pay debts

• 1

  A current ratio between 1.5 and 2.0 is generally considered healthy for most industries

• 2

  Compare your ratio to industry averages - what's healthy varies by sector

• 3

  Very high current ratios may indicate inefficient use of assets

• 4

  Monitor trends over time rather than single snapshots

• 5

  Consider seasonal fluctuations when interpreting current ratio

• Ignoring Asset Quality

• Point-in-Time Fallacy

• Industry Comparisons

• Ignoring Off-Balance Sheet Items