Current Ratio Calculator

Current Ratio = Current Assets ÷ Current Liabilities. Current assets include cash, accounts receivable, inventory, and other assets convertible to cash within a year. Current liabilities include accounts payable, short-term debt, and other obligations due within a year.

A ratio of 1.5 to 3.0 is commonly considered healthy for most industries — it means the business has enough short-term assets to cover its short-term obligations with some cushion. A ratio below 1.0 can signal liquidity trouble, while a very high ratio might mean the business is holding too much cash or inventory instead of investing it productively.

The quick ratio is stricter — it excludes inventory (and sometimes prepaid expenses) from current assets, since inventory can be slow or difficult to convert to cash. The current ratio is a broader, less conservative liquidity measure.

Not necessarily — a very high ratio can indicate the business isn't using its assets efficiently (too much idle cash or slow-moving inventory), while a low ratio might be normal for businesses with fast inventory turnover, like grocery retailers. Compare your ratio to industry norms, not just an absolute number.