Current Ratio Calculator

A printable cheatsheet with calculations
and notes

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Current Ratio Calculator

Current Ratio =

Current Assets

Current Liabilities

INTERPRETATION

The current ratio measures whether a company can pay its short-term obligations within a year.

Business owners and managers use it to determine if a company has enough working capital to cover short-term obligations.

Note: expanded calculation

Current Assets divided by current liabilities. Current assets include cash + cash equivalents + short-term investments + current receivables.

EXAMPLE

M&M’s balance sheet reported $100,000 of current liabilities and only $25,000 of current assets.

M&M’s current ratio

=25,000 / 100,000 = .25

M&M has enough current assets to pay off 25 percent of its current liabilities. This low ratio means the company may be considered highly risky and too leveraged.

BENCHMARK: HA, PG, EB, ROT

What constitutes a “good” current ratio will vary from company to company, depending on its industry and historical performance.

Generally, a current ratio of 2 or higher is considered good, 1.5 is acceptable, and anything lower than 1.5 is cause for concern.

Current ratio:

ABBREVIATION KEY:

ROT: Rule of thumb
HA: Historical Average (organization’s historical average)
PG: Peer Group average
EB: Economic Benchmark

DISCLAIMER: The interactive calculators on this site are self-help tools intended to help you visualize and explore your financial information. They are not intended to replace the advice of a qualified professional. Because each business is different, we can not guarantee accuracy.