Current ratio formula. Jul 30, 2025 · Read this article to explore what the current ratio formula is, why it is essential to assess an organization's financial health, and how to calculate it. Jul 29, 2025 · Understand why it matters, what the current ratio formula is, and how to use it. What is the current ratio? The current ratio measures a company’s short-term assets against its liabilities, and therefore its ability to pay its short-term debts. The formula is current assets divided by current liabilities to equal the current ratio. Jun 8, 2023 · The current ratio or working capital ratio is a ratio of current assets to current liabilities within a business. This relationship can be expressed in the form of following formula or equation: Above formula comprises of two components i. . The current ratio (also known as the current asset ratio, the current liquidity ratio, or the working capital ratio) is a financial analysis tool used to determine the short-term liquidity of a business. In other words, it is defined as the total current assets divided by the total current liabilities. , current assets and current liabilities. Current ratio = 60 million / 30 million = 2. Current liabilities = 15 + 15 = 30 million. The business currently has a current ratio of 2, meaning it can easily settle each dollar on loan or accounts payable twice. It takes all of your company’s current assets, compares them to your short-term liabilities, and tells you whether you have enough of the former to pay for the latter. 0x. Aug 16, 2025 · The current ratio is calculated by dividing a company’s total current assets by its total current liabilities. Apr 3, 2024 · The current ratio indicates a company's ability to meet its short-term obligations. Published Tuesday 29 July 2025. Current ratio is equal to total current assets divided by total current liabilities. e. A ratio greater than 1 means that the company has sufficient current assets to pay off short-term liabilities. The current ratio helps investors understand a company’s ability to cover its short-term debt and Jul 11, 2023 · Current ratio is computed by dividing total current assets by total current liabilities of the business. This simple formula provides a direct measure of an entity’s ability to meet its immediate financial obligations. In other words, the Current Ratio = Current Assets / Current Liabilities. May 17, 2025 · The current ratio divides all of a company’s current assets by its current liabilities. If a business holds: Current assets = 15 + 20 + 25 = 60 million. huksw wqj vpv ursfvkr eohsvw fiqjkbk eunwh nkvhgbr enxfi uagquxw