For example, if XYZ Company's total current assets are $10,000,000, and its total current liabilities are $8,000,000, then its current ratio would be $10,000,000 divided by $8,000,000, which is equal to 1.25. XYZ Company would be in relatively good short-term financial standing.
Also see: List of Important Financial Ratios for Stock Analysis at InvestorGuide.com.
Use current ratio in a sentence
“ I found a company in the stock market with a low stock price suggesting it was facing financial difficulties, but when I looked at the company's balance sheet its current ratio suggested that it would be able to pay off its short term debts without any financial trouble. ”
“ US Bank was happy to offer ABC Company a short term loan at a competitive rate because their high current ratio and past credit history made them a very low risk borrower. ”
“ Before I do business with a company I check it's current ratio, which is their ability to pay back their debts and payable accounts with cash, inventory or receivables. ”