For example, if WXY Company's current assets are $50,000,000 and its current liabilities are $40,000,000, then its current ratio would be $50,000,000 divided by $40,000,000, which equals 1.25. It means that for every dollar the company owes it has $1.25 available in current assets. A current ratio of assets to liabilities of 2:1 is usually considered to be acceptable (ie., your assets are twice your liabilities).
The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands. Acceptable current ratios vary from industry to industry. If a company's current assets are in this range, then it is generally considered to have good short-term financial strength. If current liabilities exceed current assets (the current ratio is below 1), then the company may have problems meeting its short-term obligations. If the current ratio is too high, then the company may not be efficiently using its current assets.
Analyzing Liquidity: Using the Cash Conversion Cycle: Method Incorporating Time Complements Static Measures Such as the More Common Current Ratio
May 01, 2013; EXECUTIVE SUMMARY * The current ratio and its variations are most commonly used to assess a company's liquidity, but these...
US Patent Issued to Leadis Technology on Dec. 13 for "Emission Control in Aged Active Matrix OLED Display Using Voltage Ratio or Current Ratio with Temperature Compensation" (Texas Inventor)
Dec 17, 2011; ALEXANDRIA, Va., Dec. 17 -- United States Patent no. 8,077,123, issued on Dec. 13, was assigned to Leadis Technology Inc....