Current Ratio

Metadata

  • Id: cur_ratio
  • Type: fundamentals
  • Subtype: ratios
  • Units: ratio
  • Decimal Points: 2
  • Currency Convertible: No
  • Tags: “current ratio”, “liquidity ratio”, “working capital ratio”, “short-term solvency ratio”, “current assets to current liabilities ratio”

Description

Current ratio is a way to measure how well a company can pay its short-term debts with its short-term assets. It is calculated by dividing its current assets by its current liabilities. Current assets are the assets that can be turned into cash within a year or less, such as cash, accounts receivable, inventory, etc. Current liabilities are the debts that are due within a year or less, such as accounts payable, wages, taxes, etc. The ratio shows how many times a company can cover its current liabilities with its current assets. The ratio can be used to assess a company’s liquidity and solvency. A higher ratio means that a company has more cash and liquid assets than debts, which can make it more financially stable. A lower ratio means that a company has more debts than cash and liquid assets, which can make it more financially risky. The formula for current ratio is:
Current ratio = Current assets / Current liabilities
Where: - Current assets (BS021, bs_cur_asset_report) are the assets that can be turned into cash within a year or less. - Current liabilities (BS050, bs_cur_liab) are the debts that are due within a year or less.