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WHAT IS THE CURRENT RATIO | Want to learn about all the financial metrics and ratios? In this investing 101 series, we will go deep into all the different ra...
- 10 min
- 1686
- The Fifth Person
Are you ready to unlock one of the most important tools in financial analysis? In this video, we’re diving into the Current Ratio—a simple yet powerful metri...
- 3 min
- 23
- Stocks & Strategy
Aug 17, 2021 · This tutorial provides a comprehensive overview of the current ratio, which is a type of liquidity ratio. In this tutorial, we will learn how to calculate this ratio using a practical...
- 19 min
- 21K
- WallStreetMojo
May 16, 2024 · The Current Ratio is a financial metric that shines a spotlight on a company’s short-term liquidity and ability to meet its immediate obligations. It’s a crucial tool for investors and ...
- What Is The Current Ratio?
- Understanding The Current Ratio
- Formula and Calculation For The Current Ratio
- Using The Current Ratio
- Example Using The Current Ratio
- Current Ratio vs. Other Liquidity Ratios
- Limitations of Using The Current Ratio
- The Bottom Line
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company can maximize the current assetson its balance sheet to satisfy its current debt and other payables. A current ratio that is in line with the industry average or slightly h...
The current ratio measures a company’s ability to pay current, or short-term, liabilities (debts and payables) with its current, or short-term, assets, such as cash, inventory, and receivables. In many cases, a company with a current ratio of less than 1.00 does not have the capital on hand to meet its short-term obligations if they were all due at...
To calculate the ratio, analysts compare a company’s current assets to its current liabilities. Current Ratio=Current assetsCurrent liabilities\begin{aligned} &\text{Current Ratio}=\frac{\text{Current assets}}{ \text{Current liabilities}} \end{aligned}Current Ratio=Current liabilitiesCurrent assets Current assets listed on a company’s balance sh...
A current ratio of less than 1.00 may seem alarming, but a single ratio doesn't always offer a complete picture of a company's finances. For example, a normal cycle for the company’s collections and payment processes may lead to a high current ratio as payments are received, but a low current ratio as those collections ebb. Calculating the current ...
To see how current ratio can change over time, and why a temporarily lower current ratio might not bother investors or analysts, let's look at the balance sheet for Apple Inc. In its Q4 2022 fiscal results, Apple Inc. reported total current assets of $135.4 billion, slightly higher than its total current assets at the end of the 2021 fiscal year of...
Other similar liquidity ratios can supplementa current ratio analysis. In each case, the differences in these measures can help an investor understand the current status of the company’s assets and liabilities from different angles, as well as how those accounts are changing over time. The commonly used acid-test ratio, or quick ratio, compares a c...
One limitation of the current ratio emerges when using it to compare different companies with one another. Businesses differ substantially among industries; comparing the current ratios of companies across different industries may not lead to productive insight. For example, in one industry, it may be more typical to extend creditto clients for 90 ...
The current ratio is a liquidity measurement used to track how well a company may be able to meet its short-term debt obligations. It compares the ratio of current assets to current liabilities. Measurements less than 1.0 indicate a company's potential inability to use current resources to fund short-term obligations. The current ratio provides the...
- Jason Fernando
- 1 min
May 25, 2021 · The current ratio is a commonly-used financial ratio. It tells investors and analysts whether a company is able to pay its current liabilities with its current assets (typically within a 12-month period).
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The Current Ratio - Interpreting the Ratio. The 2nd video in a series of 4 videos that explains all about the current ratio. In this video we explore the interpretation the current ratio...
- 4 min
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- Else Grech Accounting
