current ratio formula =:
Current Ratio = Current Assets/ Current Liabilities.
This is a financial measure that is designed to measure the liquidity of a company in the short term and its capability to pay its due within one year. When the current ratio is high, it means that it is well liquidated and when it is low it may have difficulty in cash flow. To illustrate, when a business has current assets of $200,000 and current liabilities of 100,000, the current ratio would be 2.0, i.e. the company has twice as many current assets as current liabilities. This is a formula that is very common in financial analysis to determine general health of finances.
Ever calculate your personal current ratio? I did! It was surprisingly helpful. By dividing my liquid assets (checking, savings) by short-term debts (credit card bills, upcoming rent), I got a clearer picture of my financial cushion. It felt a little like managing resources against a terrifying animatronic... but thankfully less scary than a night at Five Nights At Freddy's !