Current Ratio Calculator

Measure your company's ability to pay short-term obligations with current assets

Financial Information

Current Assets ($)

Current Liabilities ($)

Liquidity Results

Current Ratio

-

ratio

Current Assets ÷ Current Liabilities

Current Assets

-

$

Cash, inventory, receivables, etc.

Current Liabilities

-

$

Payables, short-term debt, etc.

Calculate to see liquidity assessment

Liquidity Analysis

Current Ratio Range	Interpretation	Your Ratio	Status
Below 1.0	Potential liquidity issues	-	-
1.0 - 1.5	Marginal liquidity	-	-
1.5 - 3.0	Healthy liquidity	-	-
Above 3.0	Possible inefficient asset use	-	-

About Current Ratio

The current ratio measures a company's ability to pay short-term obligations with current assets. It indicates financial health and liquidity position.

Improving Current Ratio

• Increase current assets (cash, receivables)

• Reduce current liabilities (payables, debt)

• Convert inventory to cash faster

• Negotiate longer payment terms

Warning Signs

• Declining ratio over time

• High proportion of inventory in assets

• Large upcoming liabilities

• Ratio below industry average

This calculator provides estimates only. Ideal ratios vary by industry. Print Results

A Current Ratio Calculator is a financial tool that helps businesses and investors assess a company's short-term liquidity—its ability to pay off debts due within one year using its current assets.

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How the Current Ratio Calculator Works

Current Ratio Formula

$$\text{Current Ratio}=\frac{\text{Current Assets}}{\text{Current Liabilities}}$$

Where:

• Current Assets = Cash, accounts receivable, inventory, short-term investments

• Current Liabilities = Accounts payable, short-term debt, accrued expenses

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Example Calculation

Financial Data	Amount ($)
Current Assets
- Cash	50,000
- Accounts Receivable	30,000
- Inventory	20,000
Total Current Assets	100,000
Current Liabilities
- Accounts Payable	25,000
- Short-Term Debt	15,000
Total Current Liabilities	40,000
Current Ratio	2.5 (100,000 ÷ 40,000)

Interpretation:

• > 2.0: Strong liquidity (may indicate excess idle assets)

• 1.5 - 2.0: Healthy balance

• < 1.0: Risk of cash flow problems

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Key Inputs Required

1. Current Assets (Liquid resources convertible to cash within 1 year)

   • Cash & equivalents

   • Marketable securities

   • Accounts receivable

   • Inventory

2. Current Liabilities (Obligations due within 1 year)

   • Accounts payable

   • Short-term loans

   • Accrued wages/taxes

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Why Current Ratio Matters

✅ Short-Term Solvency Check – Can the company pay its bills?
✅ Loan Approvals – Lenders use it to assess creditworthiness.
✅ Investor Confidence – High ratio = lower financial risk.

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Industry Benchmarks

Industry	Typical Current Ratio
Retail	1.5 – 2.0
Manufacturing	1.2 – 1.8
Technology	1.8 – 3.0
Utilities	0.8 – 1.2

Note: Capital-intensive sectors (e.g., utilities) often operate with lower ratios.

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How to Improve Your Current Ratio

✔ Increase Current Assets

• Speed up receivables (offer early payment discounts)

• Liquidate excess inventory

✔ Reduce Current Liabilities

• Negotiate longer payment terms with suppliers

• Refinance short-term debt into long-term debt

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Limitations

⚠ Ignores Asset Quality – Inventory may be obsolete, receivables uncollectible.
⚠ Seasonal Variations – Retailers may show high ratios post-holiday season.
⚠ Industry-Specific – Low ratios are normal for some sectors (e.g., grocery stores).

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Current Ratio vs. Other Liquidity Metrics

Metric	Formula	Focus
Current Ratio	CA ÷ CL	Broad liquidity
Quick Ratio	(CA - Inventory) ÷ CL	Strict liquidity (excludes inventory)
Cash Ratio	(Cash + Marketable Securities) ÷ CL	Most conservative

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Final Thoughts

The Current Ratio is a quick health check—but always analyze it alongside:

• Cash flow statements

• Industry norms

• Asset turnover ratios

Need help calculating your ratio? Share your balance sheet numbers below! 💰📊