What is a good current ratio?


Quick Answer

A current ratio of 1.5 to 1 is generally regarded as ideal for industrial companies, as of 2014. However, the merit of a current ratio varies by industry. Typically, a company wants a current ratio that is in line with the top companies in its industry.

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Full Answer

A current ratio below 1 is concerning because it signals a company may struggle to keep up with its short-term liabilities and emergency expenses. However, a current ratio of 3 or 4 to 1 suggests a company may be holding on to too much cash. A relatively high ratio is a conservative position. A relatively low ratio is risky or aggressive.

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