Current Ratio

Indicators of a firm’s ability to meet short – term financial obligations, it is the ratio of current assets to current liabilities. Though every industry has its range of acceptable current – ratios, a ratio of 2 : 1 is considered desirable in most sectors. Since inventory is included in current assets, acid test ratio is more suitable measure where stability of inventory is questionable.

Formula for calculating Current Ratio is

Current ration =Current Assets / Current Liabilities.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s