Popular Courses
COMM 217
Concordia University
ACCT 2301
The University of Texas at Dallas
Intro to Financial Accounting
General Course
COMM 293
University of British Columbia
Intro to Financial Accounting
University Study Guides
MGCR 211
McGill University
ACCT 1220
University of Guelph
Intro to Financial Accounting
University Study Guides
ACCT 217
University of Calgary
ADMS 2500
York University
COMMERCE 1AA3
McMaster University
ACCTG 211
University of Alberta
ACC 100
Toronto Metropolitan University
ADM 1340
University of Ottawa
FINA 230
Concordia University
RSM219H1
University of Toronto
COMM 1101
Dalhousie University
AFM 101
University of Waterloo
BUS 251
Simon Fraser University
AFA 100
Toronto Metropolitan University
0:00 / 0:00
Current Ratio
The current ratio is a financial ratio that tests the company's liquidity (their ability to meet short term obligations).
Interpreting the Ratio
- Ratio greater than 1 means the company has enough current assets to meet short-term obligations.
- Good liquidity
- Less likely to default on payments
- Ratio less than 1 means the company may have to liquidate long-term assets or take on more debt to meet short-term obligations.
- Weak liquidity
- More likely to default on payments
- May have to liquidate long-term assets, issue new debt or issue shares to pay for short-term obligations
0:00 / 0:00
Example: Current Ratio
Calculate the current ratio for Microsoft, Inc. for years 2018 and 2019, interpret the results.
Practice: Current Ratio
Compute the current ratio for the years 2019 and 2020. Do not round your work, round your final answer to 4 decimal places and enter you answer in decimal form.
Compute the current ratio for 2019 and 2020