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Current Ratio Calculator

Check short term liquidity by comparing current assets against the bills due within a year.

Inputs
Ratio resultCalculated
Current ratio1.895 to 1
Formula
Current ratiocurrent assets / current liabilities
Quick ratio(current assets - inventory) / current liabilities
Inputs
  Current assets                    180,000.00
  Current liabilities               95,000.00
  Inventory (for the quick ratio)   60,000.00
Working
Current ratio180,000.00 / 95,000.00 = 1.894737
Quick ratio(180,000.00 - 60,000.00) / 95,000.00 = 1.263158
Results
Current ratio1.895 to 1
Quick ratio1.263 to 1
Working capital85,000.00
Liabilities covered189.5%
Readingin the range most analysts treat as healthy
Runs locally in your browser

About the Current Ratio Calculator

The current ratio is the oldest liquidity test in accounting: divide everything expected to turn into cash within a year by everything owed within a year. Anything below 1 means the near term bills outweigh the near term assets, which is a warning unless the business collects cash daily. With 180,000 of current assets against 95,000 of current liabilities the ratio is 1.895 to 1, and working capital is the 85,000 left over.

Because inventory is the slowest current asset to convert, the quick ratio strips it out and asks the same question again. That is why the inventory field is here: taking 60,000 of stock out of the example drops the reading to 1.263, still comfortable but noticeably tighter. A large gap between the two ratios is a signal that the balance sheet leans on goods that still have to be sold.

A high ratio is not automatically good news. Well above 3 often means cash sitting idle or stock that is not moving, both of which drag on returns. Grocery chains routinely run below 1 and stay perfectly solvent because customers pay before suppliers do. Read the figure next to the industry and the cash conversion cycle rather than against a fixed target, and pair it with a profitability measure such as the EBITDA Calculator.

How to use

  1. Add up cash, receivables, inventory and prepayments, and enter the total as current assets.
  2. Enter payables, short term debt, accrued costs and anything else due within a year.
  3. Enter the inventory figure separately so the quick ratio can be calculated.
  4. Read both ratios plus working capital, and compare them against industry peers.

Common questions

What is the current ratio formula?
Current ratio = current assets divided by current liabilities. Both figures come straight off the balance sheet.
What is a good current ratio?
Between 1.5 and 3 is the usual comfort zone, but retailers and restaurants operate below 1 safely because they collect cash before paying suppliers.
How does the quick ratio differ?
It removes inventory from current assets, testing whether bills could be met without selling stock first. It is the stricter of the two tests.
Can the ratio be too high?
Yes. A figure far above 3 often points to idle cash or slow moving inventory, both of which mean capital is not being put to work.