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


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use