Current Ratio Calculator

Calculate your company's liquidity ratio by comparing current assets to current liabilities.

Current Ratio Analysis

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The Current Ratio Calculator helps businesses assess their liquidity by comparing current assets to current liabilities. This tool provides a clear indication of a company’s ability to meet short-term obligations, offering valuable insights for financial management and decision-making.

Guide:

Input Current Assets: Enter the total value of current assets (e.g., cash, accounts receivable, inventory).
Input Current Liabilities: Provide the total value of current liabilities (e.g., accounts payable, short-term debts).
Calculate Current Ratio: Click “Calculate Current Ratio” to determine your company’s liquidity ratio.
Save Report: Download the analysis as a PDF for documentation or review.

Features:

Current Ratio Calculation: Provides a clear measure of liquidity.
Dynamic Inputs: Updates results in real-time as values are entered.
Scenario Testing: Allows testing of different asset and liability scenarios.
PDF Export: Saves detailed reports for presentations or documentation.
Interactive Design: Simplified and user-friendly interface.
Responsive Layout: Fully functional on desktops, tablets, and mobile devices.
Real-Time Results: Offers immediate insights for decision-making.
Customizable Metrics: Adaptable to various industries and business models.
Interactive Dashboard: Displays results in a clear, concise format.
Free and Unlimited Use: Perform unlimited calculations.

FREQUENTLY ASKED QUESTIONS (FAQ'S)

How do you calculate current ratio?

To calculate the current ratio, divide your company’s current assets by its current liabilities. The formula is:

Current Ratio = Current Assets ÷ Current Liabilities

This ratio is a key indicator of a company’s liquidity, showing its ability to cover short-term obligations with short-term assets. For example, a current ratio greater than 1 indicates that the company has more assets than liabilities, which is a good sign of financial health.

If you want a quick and accurate way to perform this calculation, try using the Stealth Agents’ Current Ratio Calculator. This tool simplifies the process and helps you assess your business’s liquidity with ease!

What does a current ratio of 1.2 to 1 mean?

A current ratio of 1.2 to 1 means that for every dollar of short-term liabilities, a company has $1.20 in short-term assets. This indicates the company has adequate liquidity to cover its immediate obligations, which is generally a positive sign of financial health. A ratio above 1 suggests the business has more assets than liabilities, but the ideal ratio can depend on the industry. For instance, industries with high inventory turnover might operate efficiently with lower ratios. Conversely, a ratio that’s too high could suggest the company isn’t using its assets effectively, potentially tying up capital that could be better employed elsewhere. Evaluating the current ratio in context provides a clearer picture of financial stability.

What is a good current ratio?

A good current ratio is generally considered to fall between 1.5 and 3, signaling that a company has ample short-term assets to cover its short-term liabilities while maintaining operational efficiency. This range is viewed as healthy for many businesses because it indicates sufficient liquidity without tying up excess capital in underutilized assets. However, the ideal ratio can vary depending on the industry. For example, companies in sectors with slower inventory turnover might benefit from a higher ratio, while those in fast-moving markets could operate effectively with a lower one. A current ratio significantly higher than 3 might suggest the business isn’t using its resources efficiently, while a ratio below 1.5 could indicate potential liquidity issues and risks to financial health. Analyzing this metric alongside industry standards helps paint a clearer picture of a company’s financial stability.

Is 0.5 a good current ratio?

A current ratio of 0.5 is generally not considered good, as it indicates that a company has only 50 cents in short-term assets for every dollar of short-term liabilities. This low ratio suggests potential liquidity issues, as the business may struggle to meet its immediate financial obligations. Such a situation could pose significant risks to the company’s financial health and stability. While certain industries with high cash flow or rapid turnover may sustain lower ratios, a current ratio of 0.5 is typically below the acceptable range for most businesses. It often signifies that the company needs to re-evaluate its asset management or financing strategies to avoid potential financial strain.

What is ideal level of current ratio?

The ideal current ratio typically falls between 1.5 and 3, as this range indicates that a company has enough short-term assets to cover its short-term liabilities while maintaining smooth operations. This balance is generally seen as a sign of strong liquidity and financial health. However, the ideal current ratio can vary depending on the industry. For example, sectors with slower inventory turnover or higher working capital demands may benefit from a higher ratio, while businesses in fast-paced industries might operate effectively with a lower one. A ratio significantly above 3 could indicate underutilized assets or inefficient use of resources, whereas a ratio below 1.5 may signal potential liquidity issues and challenges in meeting immediate financial obligations. Evaluating the current ratio with industry standards in mind provides a clearer perspective on a company’s stability.