A current ratio calculator is a straightforward tool for calculating the current ratio, which we use to assess a company’s liquidity. Note that the current ratio sometimes refer to as the working capital ratio, so don’t be fooled by the varied names! We shall explain what a current ratio is in the paragraph below.

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## What is a current ratio?

The current ratio is a liquidity ratio that assesses a company’s capacity to pay short-term or one-year commitments. It explains to investors and analysts how a firm might use current assets on its balance sheet to pay down current debt and other obligations.

A current ratio of equal to or slightly greater than the industry average is typically seen as appropriate. Conversely, a lower current ratio than the industry norm might imply a higher risk of default or trouble. Similarly, if a company’s current ratio is unusually high relative to its peers, it suggests that management isn’t making the best use of its assets.

The current ratio is so named because it includes all current assets and liabilities, unlike some other liquidity ratios. The working capital ratio is another name for the current ratio.

## The current ratio formula

Analysts determine the ratio by comparing a company’s current assets and liabilities. Cash, accounts receivable, inventory, and other current assets (OCA) that are projected to be liquidated or converted into cash in less than one year are reported as current assets on a company’s balance sheet. Accounts payable, wages, taxes payable, short-term loans, and the current part of long-term debt are all examples of current liabilities.

By dividing current assets by current liabilities, determine the current ratio. The general formula for the current ratio is as follows:

Current Ratio = current assets / current liabilities

## How to calculate a current ratio with our calculator?

In the current ratio calculation, current assets are defined as anything your firm has that can be liquidated or transformed into cash within a year. As opposed to long-term assets like property or equipment, current assets include accounts receivable and inventory, as well as all of the cash your company already has.

If you’re not sure how to compute the current ratio, try following these steps:

• First and foremost, you must examine the studied company’s financial statement.
• Find the position “Current Assets” in the assets section of the balance sheet produced in line with the IFRS (International Financial Reporting Standards).
• Then look for the position “Current Liabilities” in the section “Liabilities and Equity.”
• Simply fill in the required fields in our calculator to acquire the current ratio’s value.
• In the following portion of the article, we’ll go through how to understand the computed result.

## Example of current ratio calculation

For the fiscal year ended 2017, the current ratios of three companies—Apple, Walt Disney, and Costco Wholesale—were estimated as follows: