How do you calculate current ratio?

Current Ratio = Current Assets / Current Liabilities If a business holds: Current assets = 15 + 20 + 25 = 60 million Current liabilities = 15 + 15 = 30 million Current ratio = 60 million / 30 million = 2.0x The business currently has a current ratio of 2, meaning it can easily settle each dollar on loan or accounts payable twice.

What is an example of a current ratio?

For example, if a company's total current assets are $90,000 and its current liabilities are $72,000, its current ratio is $90,000/$72,000 = 1.25. If the current ratio of a business is 1 or more, it means it has more current assets than current liabilities (i.e., positive working capital).

Why is the current ratio called current?

The current ratio is called current because, unlike some other liquidity ratios, it incorporates all current assets and current liabilities. The current ratio is sometimes called the working capital ratio. The current ratio compares all of a company’s current assets to its current liabilities.