Accounting & Finance
Current ratio
The same relationship as a multiple, which makes it comparable between businesses of different sizes.
The Formula
current ratio = current assets / current liabilities
The same relationship as a multiple, which makes it comparable between businesses of different sizes.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| CR | Current ratio | ratio | Times current assets cover current liabilities. |
| CA | Current assets | currency | Cash, receivables, inventory and prepayments. |
| CL | Current liabilities | currency | Payables, short-term debt and accruals. |
What Each Symbol Means
CRratio
Current ratio
Times current assets cover current liabilities.
CAcurrency
Current assets
Cash, receivables, inventory and prepayments.
CLcurrency
Current liabilities
Payables, short-term debt and accruals.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate working capital page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Working Capital, filed under Business. Every number the guide produces comes from substituting into this one line.