Online Calculators for Business & Investment
The first liquidity ratio and look at is the Current Ratio and this is also the most widely used liquidity ratio. Quite simply, it measures how easily a business can pay short-term liabilities with short-term assets; that is, its current liabilities from current assets.
The Current Ratio is important because if you can't pay your short-term liabilities you are out of business; and you can only pay your debts with your assets that are highly liquid, that is, they can be converted to cash quickly to pay those debts when they fall due.
The result of the ratio is also general indicator of the strength of the business. A high Current Ratio generally means a healthier business. This is not a hard and fast rule for all businesses, but for most businesses it's a pretty straightforward indicator into how easily the business will survive in the near future.
The Current Ratio of say, 2 or 1.82, simply represents the number of times your current assets can be used to pay out your current or short-term liabilities. So a result of 1.82 simply means your current assets can be used 1.82 times over to pay current liabilities.
Current Ratio Calculator
The calculator asks for:
Current Assets, which are found on the balance sheet.
Current Liabilities, which are also found on the balance sheet.