Current Ratio Calculator Online
Calculate current ratio to assess your company's liquidity and ability to meet short-term obligations. Essential for financial analysis and credit assessment.
Cash, inventory, receivables, etc.
Short-term debts and payables
What is Current Ratio?
Current ratio is a liquidity ratio that measures a company's ability to pay its short-term obligations (debts due within one year) using its short-term assets. It's calculated by dividing current assets by current liabilities.
A current ratio above 1 indicates the company has more current assets than current liabilities, suggesting it can meet its short-term obligations. This is a key metric used by creditors, investors, and analysts to assess financial health.
How to Use the Current Ratio Calculator
- Enter current assets: Input the total value of assets that can be converted to cash within one year (cash, accounts receivable, inventory, marketable securities, etc.).
- Enter current liabilities: Input all debts and obligations due within one year (accounts payable, short-term loans, accrued expenses, etc.).
- Calculate: Click "Calculate Current Ratio" to see your current ratio and interpretation.
Understanding Current Ratio
Current Ratio Formula
Current Ratio = Current Assets / Current Liabilities. A ratio of 1.0 means assets equal liabilities, while ratios above 1.0 indicate excess assets.
What's a Good Current Ratio?
Generally, a current ratio between 1.5 and 2.0 is considered healthy. Ratios below 1.0 indicate potential liquidity issues, while ratios above 2.0 may suggest inefficient use of assets.
Why It Matters
Current ratio helps assess short-term financial health, creditworthiness, and ability to meet obligations. Creditors use it to evaluate loan applications, and investors use it to assess risk.
Frequently Asked Questions
What are current assets?
Current assets include cash, cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets expected to be converted to cash within one year.
What are current liabilities?
Current liabilities include accounts payable, short-term loans, accrued expenses, taxes payable, current portion of long-term debt, and other obligations due within one year.
Can current ratio be too high?
Yes, a very high current ratio (above 3.0) may indicate inefficient use of assets. Excess cash or inventory that isn't generating returns could be better invested elsewhere.
How does current ratio differ from quick ratio?
Current ratio includes all current assets, while quick ratio excludes inventory and prepaid expenses (less liquid assets). Quick ratio is a more conservative measure of liquidity.
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