Home>Liquidity Ratio>Current Ratio

##### Current Ratio Calculator - Glossary:

Using our current ratio calculator, helps to compare, measure, understand the overall health of the business.

##### Current Ratio:

Shows the proportion of current assets to current liabilities. In simple words, it measures a company's ability to pay the short-term liabilities with its current assets.

##### How to calculate?

**Formula:**
Current Ratio = Current Assets/Current Liabilities.

This is a balance sheet component; the values are commonly stated against current assets and current liabilities.

##### Current Assets:

This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short-term.

##### Current Liabilities:

This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

##### Example:

Current ratio for a company with a total current assets of $200,000 and current liabilities of $155,000 is 1.29 : 1. It means $1.29 of current assets are available to cover each $1 of its current liabilities.
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