Liquidity
Current ratio
The less strict measure including every current asset. The gap between the two ratios is the stock-heavy share of current assets.
The Formula
CR = (QA + inventory + prepayments) / current liabilities
The less strict measure including every current asset. The gap between the two ratios is the stock-heavy share of current assets.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| CR | Current ratio | ratio | All current assets over current liabilities. |
| CA | Current assets | currency | Quick assets plus inventory plus prepayments. |
| CL | Current liabilities | currency | Obligations due within twelve months. |
What Each Symbol Means
CRratio
Current ratio
All current assets over current liabilities.
CAcurrency
Current assets
Quick assets plus inventory plus prepayments.
CLcurrency
Current liabilities
Obligations due within twelve months.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate quick ratio 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 Quick Ratio, filed under Business. Every number the guide produces comes from substituting into this one line.