Current Ratio

Benzinga  Jun 19  Comment 
Bellicum Pharmaceuticals Inc (NASDAQ: BLCM) shares are trading higher by $1.47 (12.8 percent) at $12.80 in Monday's session. The stock was cited in Clayton News Review over the weekend discussing the company's current ratio, which is 11.15: "The...
Motley Fool  Jan 1  Comment 
Here's a quick way to check a company’s viability before you buy its stock.
SeekingAlpha  Jan 10  Comment 
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DailyFinance  Nov 27  Comment 
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The Hindu Business Line  Feb 19  Comment 
A higher current ratio indicates that a company is liquid and solid; but excessively high may be indicative of problems in working capital management.
Penny Stock DD  Dec 13  Comment 
Stock Performance: SAIC, Inc. (NYSE:SAI) moved down by 1.12% to close at $12.32 with traded volume of 2.16 million shares in the last trading day as compare to its average volume stood at 2.42 million. Its total market capitalization arrived at...
The Globe and Mail  Sep 30  Comment 
It's a positive sign that Suncor's forward price-to-earnings is lower than the current ratio
The Hindu Business Line  Apr 18  Comment 
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The Analytic  Mar 5  Comment 
BANGKOK, 5 March 2011 – Prime Minister Abhisit Vejjajiva has stressed that the government has been giving importance to women rights and will encourage greater participation of women in all levels of public-and private-sector affairs as well as...


Current Ratio equals current assets divided by current liabilities.

The current ratio measures a company's ability to meet its short-term obligations such as paying its creditors, buying raw materials for production etc.. It also serves as an indication of a company's relative efficiency. It is calculated by dividing current assets by current liabilities.

A current ratio greater than 2.0 indicates a company's current assets - those that it can sell in the next 12 months - are twice as large as its short term liabilities. If current liabilities exceed current assets (for a current ratio less than 1) then the company may not be able to meet its short-term debt obligations.

Generally, the higher the ratio, the more liquid the company is. This means the company would have a better short-term financial standing to meet its debt obligations. However, an investor should also take note of a company's operating cash flow in order to get a better sense of its liquidity. A low current ratio is can often be supported by a strong operating cash flow.

On the other hand, if a company is able to operate with a low current ratio, it means that the company is more efficient about using its capital. Therefore, a low current ratio can lead to higher return of assets.


  • If a company ABC has $10 million in current assets and $5 million in current liabilities, the current ratio would be 2 (10/5 = 2). Company ABC has $2.00 of Current Assets to meet $1.00 of its Current Liability.
  • Company XYZ has $20 million in current assets and $30 million in current liabilities, the current ratio would be 0.67 (20/30=0.67). Company XYZ has $0.67 of Current Assets to meet $1.00 of its Current Liability.
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