Business calculators

Current Ratio Calculator

This easy-to-use Current Ratio Calculator will help you quickly and accurately assess your company's financial health. By plugging in a few key pieces of financial information, you'll be able to get an instant read on whether your business is in good shape or if there are areas that need improvement.

Understanding current ratio

What is the current ratio?

Sometimes called the working capital ratio, the current ratio is a liquidity ratio that shows, in part, a  company’s ability to pay back short-term debt obligations. Short-term debt, also called current debt, is anything due within one year — i.e., must be paid back within the next year. 

These debts are measured against the current assets the company owns. Current assets, aka short-term assets, include anything that can be converted into cash within the next year. Measuring the relationship between the debt you have to pay (liabilities) and the ways you have to pay it (assets) provides important insight into the financial position of a company. 

What is the current ratio formula? 

To calculate the current ratio, you divide the total of all current assets by the total of all current liabilities. The formula is 

current ratio = total current assets / total current liabilities

But you’ll need to do some additional math and add together both parts of the equation. The current assets include cash, cash equivalents, marketable securities, accounts receivable, and prepaid liabilities. Current liabilities can include accounts payable, bank loans, and business credit cards. So the equation will look like this in practice:

current ratio = (cash + cash equivalents + marketable securities + accounts receivable + prepaid liabilities) / (accounts payable + bank loans + credit cards)

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Common current ratio questions

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