Current Ratio calculator
Current Ratio is a liquidity ratio that measures company's ability to pay its debt over the next 12 months or its business cycle. Current Ratio formula is:
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Interpretation of Current Ratio
Current ratio is a financial ratio that measures whether or not a company has enough resources to pay its debt over the next business cycle (usually 12 months) by comparing firm's current assets to its current liabilities. Generally, a current ratio of 2:1 is considered to be acceptable. » more on interpretation of Current Ratio
Definitions and terms used in the Current Ratio calculator
- Current Assets: the assets that are expected to be converted into cash or otherwise used up within a year or one business cycle (whichever is longer). Typical current assets include cash and cash equivalents, accounts receivable, inventory, marketable securities, the portion of prepaid expenses which will be used within a year and other assets that could be converted to cash in less than one year.
Current Assets = Cash + Bank + Accounts Receivable + Marketable Securities + Inventory + Prepaid Expenses
- Current liabilities (short term debt): obligations or debts that are due within one fiscal year or the operating cycle. For example, accounts payable, accrued liabilities, dividends, unpaid taxes and other debts that are due within one year.
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