Current ratio

Also called: liquidity

Whether the company can pay bills due within a year from assets it can turn into cash within a year.

Formula

Current ratio = Current assets ÷ Current liabilities

Worked example

1. Current assets = $6.0bn
2. Current liabilities = $4.0bn
3. $6.0bn ÷ $4.0bn

Result: 1.50

How to read it

Above 1 means short-term assets cover short-term debts. Very high can mean idle cash.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)