Overview

Current ratio, also called the working capital ratio, is a liquidity ratio that measures how well a company meets its short-term obligations. It compares a company's current assets and current liabilities to determine the overall financial health. The formula for calculating the current ratio is as follows:

Current Ratio = Current Assets / Current Liabilities

While companies often want to avoid a low current ratio, a very high current ratio can also indicate that the company is not investing its available cash efficiently to grow their business.

Share
Reviews Add a review
No reviews yet

More From Corporate Finance Institute®

Browse our top rated business templates. See All
restructuring financial model template preview 1 Restructuring Financial Model Template
235
0
This restructuring financial model template is used to demonstrate the financial interactions behind the restructuring process. Adjust this model to…
TMT Financial Model Template Preview TMT Financial Model Template
357
0
This TMT financial model template is used to value technology, media, and telecom firms. This model provides a template to…
bank financial model template preview 1 Bank Financial Model Template
327
0
This bank financial model template is used to value financial institutions group (FIG) companies. This is a comprehensive model that…
Synthetic Call Chart Option Profit/Loss Graph Maker
922
240
This free Option Profit/Loss Graph Maker allows the user to combine up to ten different types of options as well…
Directional Trading Strategies Template Directional Trading Strategies Template
748
0
The directional trading strategies template allow users to determine the profit when buying options. This template focuses on directional strategies…
HELOC Calculator Template Home Equity Line of Credit (HELOC) Calculator
439
106
This home equity line of credit (HELOC) calculator can calculate the maximum amount of loan a homeowner is eligible to…