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Click Ratio Name For More Information
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Current Ratio
Also known as working capital ratio.
What it measures
The current ratio measures your company's ability to pay the
current liabilities (bills) with current assets (cash, marketable securities,
accounts receivable, and inventory). Lenders look at this ratio to
determine if you can pay your short term debts. This should be calculated
on a monthly basis.
How is the current ratio calculated
Divide current assets by current liabilities. For example,
if your total current assets are $575,000 and the total current liabilities are
$350,000 then the current ratio is calculated
575,000
--------- =
1.64
350,000
Target
The target for the current ratio is 1.5
How to improve your current ratio
The quickest method to improve the current ratio is to pay down
your current bills. You can also increase your sales which will increase
your cash or accounts receivable.
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