What Is the Current Ratio?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables.

Enter Fiancial Information:

Liabilities

Asset

Sundray Creditors   Inventories
Bill Payable   Sundary Debitors
Dividend Payable   Cash In Bank
Accrued Expenses   Bills Receivable
Short Term Advance   Prepaid Expenses
Share Capital   Patents
Debenture   Machinery
      Land & Building

Formula and Calculation for Current Ratio

To calculate the ratio, analysts compare a company's current assets to its current liabilities. Current assets listed on a company's balance sheet include cash, accounts receivable, inventory and other assets that are expected to be liquidated or turned into cash in less than one year. Current liabilities include accounts payable, wages, taxes payable, and the current portion of long-term debt.

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