Current Ratio Calculator
Calculate the current ratio from current assets and current liabilities, with a health-band interpretation of liquidity.
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Current Ratio
2.00
How the Current Ratio Is Calculated
The current ratio is a liquidity measure that shows whether a business has enough short-term assets to cover its short-term liabilities. Enter current assets (cash, receivables, inventory) and current liabilities (payables, short-term debt) to see the ratio and a health-band interpretation.
Example
A company with $180,000 in current assets and $90,000 in current liabilities has a current ratio of 180,000 ÷ 90,000 = 2.0 — meaning it has $2 in short-term assets for every $1 of short-term liabilities, a generally healthy position.
Common Use Cases
- Checking a company's short-term financial health before investing or lending.
- Tracking liquidity trends over multiple reporting periods.
- Comparing liquidity against competitors in the same industry.
- Supporting loan covenant compliance checks that reference minimum current ratios.
FAQs
What is considered a good current ratio?
A ratio between 1.5 and 3.0 is generally considered healthy for most businesses. Below 1.0 can signal liquidity risk, while a very high ratio may indicate the business isn't deploying its assets efficiently.
How is the current ratio different from working capital?
Working capital is the dollar difference between current assets and current liabilities, while the current ratio expresses the same relationship as a proportion. Use the Working Capital Calculator to see the dollar figure alongside this ratio.
Does the current ratio account for how liquid assets actually are?
Not precisely — it treats inventory the same as cash, even though inventory can take longer to convert to cash. The quick ratio (which excludes inventory) offers a stricter, more conservative view of short-term liquidity.