Current Ratio: Understanding Its Significance and . . . - Quartr The current ratio is a valuable financial ratio that assesses a company's short-term liquidity position A good current ratio typically falls within the range of 1 5 to 3, indicating sufficient current assets to cover current liabilities comfortably
Table 1: Selected liquidity ratios for | StudyX Current Ratio: The current ratio decreased from 1 09:1 in 2022 to 0 98:1 in 2024 A current ratio below 1 indicates that the business may not have sufficient current assets to cover its current liabilities, signaling potential liquidity challenges
How to Use Liquidity Ratios to Analyze Financial Statements Current Ratio: Indicates the company’s capacity to cover its current liabilities with its current assets A ratio above 1 suggests good liquidity, while a ratio below 1 signals potential liquidity issues
How to Calculate Use Liquidity Ratios Current Ratio A current ratio measures a company’s ability to cover short-term liabilities with its current assets The formula for calculating the current ratio is: Current Ratio = Current Assets Current Liabilities Note that this liquidity ratio and others assess a company’s short-term or current financial health
The Impact of Liquidity on Profitability of Some Selected . . . Liquidity ratio is used to judge the ability of a firm to meet its short term maturing obligations The higher the ratio the greater the margin of safety for short-term creditors (current ratio) While profitability ratio is concern with relative profitability and efficiency of utilization of resources of a business
Understanding Liquidity Ratios: Assessing a Companys Ability . . . Liquidity ratios are commonly used to assess a company’s ability to cover its short-term debts by comparing its current assets with its current liabilities Two popular types of liquidity ratios include the current ratio and quick ratio