Current Ratio
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In the Financial Manager, the current ratio shows total current assets in relation to total current liabilities. This ratio indicates the collectibility of current liabilities in the case of a real crisis.
The calculation for this ratio is
where:
Total Current Assets = Cash + Accounts Receivable + Inventory + Other Current Assets
Total Current Liabilities = Accounts Payable + Other Current Liabilities
Example
If total current assets are $105,000 and total current liabilities are $55,000, then 1.91 is the current ratio.
The calculation for this example is
