Current Ratio Calculator

Calculate the current ratio

The current ratio is a liquidity measure that shows whether a company can pay its short-term obligations with its short-term assets. It is calculated by dividing current assets, such as cash, receivables and inventory, by current liabilities, the debts due within a year. A current ratio of one and a half to one means the company has one and a half dollars of current assets for every dollar of current liabilities. This calculator also reports working capital, the difference between the two figures.

A ratio above one indicates the company can cover its near-term debts, while a ratio below one signals it may struggle to do so.

Reading the current ratio

Lenders, suppliers and investors use the current ratio to gauge financial health. A ratio around two is often considered healthy, giving a comfortable cushion, though the ideal varies by industry: businesses with fast inventory turnover can operate safely with lower ratios. A very high ratio is not always good either, as it may mean cash or inventory is sitting idle rather than being put to work.

Because the current ratio includes inventory, which can be slow to convert to cash, the stricter quick ratio is sometimes preferred for a conservative view. All calculation happens locally in your browser.

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