Investor Glossary-current ratioInvestor Glossary-current ratioInvestor Glossary-current ratioInvestor Glossary-current ratioInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Current Ratio

The HTML to link to this page
 

Current ratio is balance-sheet financial performance measure of company liquidity. Current ratio is calculated by dividing current assets by current liabilities. Current ratio of more than 1.0 means that a company's short term assets exceed its short term liabilities. For example, if Tractorco has current assets of $12 million and current liabilities of $10 million then the current ratio for Tractorco is 1.20 or 1.2x. Although a current ratio of 2.0 or 2x means that a company has great short term financial strength, a current ratio of less than 1.0 does not necessarily signal problems unless this weak current ratio shows persistent inability of a company to meet short term obligations. Current ratio is often calculated in conjunction with a second ratio, the "quick ratio" which subtracts inventories from current assets before dividing by current liabilities. Both quick ratio and current ratio "normal" measures very greatly by industry and a comparison of current ratio with other companies within the same industry or sector is helpful in determining a investment's current ratio quality.



Rate this current ratio definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: 401a, real GDP, inflation, command economy, in escrow, cancelled check, ex-dividend, 1035 exchange, required rate of return, Key Rate Duration, stock market close, margin rate, average price per share, current ratio, deferred tax, Zero Cost Collar, stock split, EBITDA, implied volatility, LIBOR, balance sheet, risk management, FTSE, deferred revenue, per diem, labor relations, retained earnings, debt service coverage, phantom income, ex-dividend date, liquidity ratio, FICO score, 1031 exchange, annual return, option premium, covered put, 144a, wholly-owned subsidiary, irrevocable trust, APR, reverse mortgage, minority interest, open position, VIX, quality assurance, class C shares, dividends payable, limit order, diluted share


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use