Current Ratio Calculator
Calculate the current ratio to measure a company's ability to pay short-term obligations.
Assess liquidity using current assets and liabilities.
What Is the Current Ratio?
The Current Ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations (due within one year) using its short-term assets. It is one of the first metrics investors and creditors review to assess financial health.
The Three Liquidity Ratios
Current Ratio (broadest):
Current Assets / Current Liabilities
Quick Ratio (acid-test, excludes inventory):
(Current Assets − Inventory) / Current Liabilities
Cash Ratio (strictest):
Cash and Cash Equivalents / Current Liabilities
What Counts as Current Assets?
Current assets are expected to be converted to cash within one year:
- Cash and cash equivalents
- Short-term investments (marketable securities)
- Accounts receivable
- Inventory
- Prepaid expenses
What Counts as Current Liabilities?
Current liabilities are due within one year:
- Accounts payable
- Short-term debt and current portion of long-term debt
- Accrued expenses
- Deferred revenue
How to Interpret the Current Ratio
| Current Ratio | Interpretation |
|---|---|
| Below 1.0 | Danger, more short-term obligations than assets |
| 1.0 – 1.5 | Low, manageable but limited cushion |
| 1.5 – 2.0 | Healthy, solid short-term liquidity |
| 2.0 – 3.0 | Strong, comfortable liquidity buffer |
| Above 3.0 | May indicate idle assets not being put to work |
Working Capital
A closely related concept is Working Capital:
Working Capital = Current Assets − Current Liabilities
Positive working capital means the business can fund day-to-day operations. Negative working capital is a red flag in most industries (though some high-turnover retailers like grocery stores run successfully with slightly negative working capital by design).
Worked Example
A company has $450,000 in current assets (including $80,000 inventory) and $250,000 in current liabilities, plus $120,000 cash:
- Current Ratio = $450,000 / $250,000 = 1.80 (Healthy)
- Quick Ratio = ($450,000 − $80,000) / $250,000 = 1.48
- Cash Ratio = $120,000 / $250,000 = 0.48
- Working Capital = $450,000 − $250,000 = $200,000
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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