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With the help of this current ratio calculator, you can quickly evaluate the financial health of your business by measuring its ability to meet the liabilities (debts or obligations) when they become due.
A current ratio warns about the condition of the business. It shows whether the business is capable of paying back the debts or not. It is good to find out the current ratio on a monthly, or quarterly basis because if you will calculate it on a yearly basis, then you will end up with liquidity problems and it will be too late to take the necessary actions.
The current Ratio is one of the most vital calculations that lets you calculate the ability of a company to pay off its debts.
Use the following formula to calculate the current ratio manually:
Current Ratio Formula = Current Assets / Current Liabilities
Go through the following steps to calculate the current ratio precisely:
If you want to save time then get the assistance of the online current ratio formula calculator because it will let you perform the current ratio accounting in a matter of seconds.
Let’s suppose there is a company A and when you examine the balance sheet of this company, it looks like this:
Now how to find current ratio.
Current Ratio = Current Assets / Current Liabilities
Current Ratio = (Cash + Accounts Receivable + Inventory + Stock Holdings) / Current Liabilities
Current Ratio = (85,000 + 50, 000+ 26,000+ 8,000)/210,000 = 0.85
The current ratio is less than 1 which shows that it seems impossible for the company to pay its debts in the the defined payback period.
Simply follow a couple of straightforward steps to perform the current ratio calculation with our financial ratio calculator.
From the source of investopedia.com: Current Ratio Explained With Formula
From the source of Wikipedia: Current Ratio