Free calculator
Current ratio calculator
Enter total current assets and total current liabilities from the balance sheet. You get the current ratio and working capital, with the arithmetic shown.
Balance sheet and income statement
Cash, receivables, inventory, prepaid expenses and other assets expected to turn into cash within a year.
Payables, accrued expenses, short-term debt and the current portion of long-term debt.
The current ratio formula
A company with $450,000 of current assets and $300,000 of current liabilities has a current ratio of 1.50 and $150,000 of working capital.
What goes in each line
- Current assets: cash and equivalents, short-term investments, accounts receivable, inventory, prepaid expenses and other assets expected to be realized within a year or the operating cycle.
- Current liabilities: accounts payable, accrued expenses, deferred revenue, short-term borrowings, the current portion of long-term debt and the current portion of lease liabilities.
Both totals are usually shown on a classified balance sheet. Use the same date for both. For a stricter test that leaves inventory out, use the quick ratio calculator.
Current ratio: questions
- What does the current ratio measure?
- Whether a company's current assets, those expected to turn into cash within a year, cover the obligations due within a year. A ratio of 1.5 means $1.50 of current assets for each $1 of current liabilities.
- What is a good current ratio?
- There's no single right number. Below 1 means current liabilities exceed current assets, which can signal a cash squeeze. A very high ratio can mean cash or inventory sitting idle. Businesses that collect cash fast and hold little inventory often run comfortably on lower ratios than manufacturers. Compare with your own history, your lenders' covenants and companies in your industry.
- What's the difference between the current ratio and the quick ratio?
- The quick ratio leaves out inventory and prepaid expenses, which can't be turned into cash quickly to pay a bill. In the example on this page, the current ratio is 1.50 but the quick ratio is 0.83, because much of the current assets is inventory.
- Is working capital the same as the current ratio?
- They use the same two numbers. Working capital is the difference, current assets minus current liabilities, so it's an amount. The current ratio is the quotient, so it compares companies of different size.
More ratios
The financial ratios cheat sheet sets out liquidity, activity, leverage and profitability ratios with their formulas, and links to a calculator for each one we offer.