Current Ratio Calculator
From current assets and current liabilities, compute the current ratio — a measure of short-term solvency.
Input Data
Results
At a glance:Current ratio = current assets / current liabilities (x). It measures short-term solvency: >1 means assets cover near-term debt; higher = more buffer, but too high may mean idle cash or piled inventory. Read with quick ratio and cash ratio. WARNING: Static snapshot; high ratio doesn't guarantee realizable assets (slow stock, bad debts) — check composition, compare with peers/history. Education, not advice.
Formula
Current ratio = Current assets / Current liabilities.
$$\text{Current Ratio} = \dfrac{\text{Current Assets}}{\text{Current Liabilities}}$$How to Use
- Enter total current assets.
- Enter total current liabilities.
- View the ratio (>1 means assets cover short-term debt).
FAQ
What current ratio is healthy?
No universal standard; industry varies widely. Traditionally ~1.5-2 is a rough reference, but fast-cash retail tolerates lower, capital-intensive needs higher. Compare with peers and your own trend, and read asset quality.
Is a higher ratio always better?
No. Too high may mean idle cash, piled inventory or uncollected receivables — low efficiency and opportunity cost. Aim for 'enough to cover short-term debt without wasting resources'. Read with quick and cash ratios.
What is the difference from the quick ratio?
Current ratio uses all current assets; quick ratio excludes slower-to-sell inventory (sometimes prepayments), keeping only cash, equivalents and receivables — more conservative. If current is high but quick is low, inventory likely dominates; check if it can sell.
How can Hong Kong SMEs improve the ratio?
On the asset side: speed receivables (shorter terms, early-pay discounts), clear slow inventory to cash, hold reasonable cash. On the liability side: refinance short-term into medium/long-term loans, negotiate longer supplier terms. HK trade finance and SME financing guarantee schemes help short-termliquidity, but weigh the added debt.
Does the ratio fluctuate seasonally?
Yes. It is a static snapshot; seasonal businesses (retail, toys, apparel) build inventory before peak (inventory up, cash down) then see receivables up, inventory down after — the ratio swings within the year. Compare at the same reporting date or use multi-period averages to avoid seasonal distortion.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.