Current Ratio Calculator Assess short-term liquidity — the ability to pay bills due within 12 months — with industry benc...
Current Ratio Calculator
Assess short-term liquidity — the ability to pay bills due within 12 months — with industry benchmarks and risk analysis.
The Current Ratio measures a company’s ability to pay short-term obligations (due within 12 months) with its short-term assets.
Formula: $$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$$
Interpretation:
- < 1.0 — Risk of liquidity shortfall (liabilities > assets)
- 1.0 – 1.5 — Caution zone (common in inventory-heavy businesses)
- 1.5 – 3.0 — Generally healthy (ideal for most industries)
- > 3.0 — Potential inefficiency (excess idle cash, poor working capital mgmt)
Real Examples (2024): Apple: 0.99, Walmart: 0.83, Tesla: 1.73, Microsoft: 1.65.
⚠️ The current ratio has important blind spots:
- Quality of assets — $50K in uncollectible receivables ≠ $50K cash.
- Timing mismatch — Assets may mature *after* liabilities are due.
- Inventory liquidity — Slow-moving stock inflates assets but isn’t spendable.
- Window dressing — Companies may delay payables or accelerate collections before reporting.
Always pair with:
- Quick Ratio = (Cash + Marketable Securities + AR) / Current Liabilities
- Cash Ratio = (Cash + Marketable Securities) / Current Liabilities
- Operating Cash Flow Ratio = Operating Cash Flow / Current Liabilities
“Healthy” varies significantly by sector:
| Industry | Typical Range | Why? |
|---|---|---|
| Retail | 1.2 – 1.8 | High inventory turnover; just-in-time supply chains |
| Manufacturing | 1.5 – 2.2 | Capital intensive; longer production cycles |
| Technology | 2.0 – 4.0+ | Asset-light; high cash reserves (e.g., SaaS) |
| Services | 1.0 – 1.5 | Low inventory; receivables-driven |
📉 Trend matters more than snapshot: A declining ratio month-over-month signals deteriorating liquidity — even if still >1.5.
➡️ Basic Mode
Quick check: enter total current assets & liabilities from your balance sheet.
➡️ Detailed Mode
Break down components to see:
- How inventory impacts your ratio (excluded in Quick Ratio)
- Whether receivables are a risk (large AR + low cash = red flag)
- Working capital drivers (e.g., AP vs. ST debt)
Select your industry to see how you compare to peers.
Note: All figures should be from the same balance sheet date (e.g., Dec 31, 2024).