Current Ratio Calculator
Calculate the current ratio from current assets and current liabilities to assess whether a business can cover its short-term obligations.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Current Ratio Calculator | — | Current ratio = current assets / current liabilities | ratio |
Step-by-Step Examples
Current assets 450,000, current liabilities 300,000.
- Current ratio = 450,000 / 300,000
- Current ratio = 1.50
- Working capital = 150,000
Current assets 400,000 including 250,000 inventory, current liabilities 300,000.
- Current ratio = 400,000 / 300,000 = 1.33
- Quick ratio = (400,000 − 250,000) / 300,000 = 0.50
- The current ratio looks acceptable, but liquidity depends entirely on moving inventory
Current assets 180,000, current liabilities 260,000.
- Current ratio = 180,000 / 260,000
- Current ratio = 0.69
- Working capital = −80,000 — a shortfall
Real-World Applications
Common Mistakes to Avoid
A very high current ratio can indicate cash sitting idle, excessive inventory, or uncollected receivables — capital that could be deployed more productively.
Grocery retailers operate healthily near 1.0 with fast inventory turnover, while manufacturers typically need considerably more. Sector context is essential.
Current assets include receivables that may be slow or uncollectable. A strong ratio built on ageing receivables overstates real liquidity.