The Current Ratio is used to assess the short-term financial position of a company's concern. That means it indicates the company's ability to meet its short-term obligation.

A high current ratio indicates that a company can meet its short-term obligations on time. The low current ratio indicates a weak liquidity position for the company. It means that it may not, able to pay off its current liabilities without facing difficulties.

If current assets are double in amount compared to its current liabilities (that is 2:1 ratio) or higher is considered good.

The Current Ratio is also known as Working Capital Ratio.

The value as per the formula (current assets / current liabilities) is calculated as (26593.04 / 12869.13) = 2.07.

If current assets are double in amount compared to its current liabilities, that is 2:1 or higher is considered good.

A low current ratio indicates a weak liquidity position for the company. It means that the company is insufficient to pay off current liabilities.

The current of 2:1 is considered satisfactory because, first of all, it means the current assets are double in amount of its current liabilities, so the company will not face problems to cover current obligations. And secondly, it can provide for losses and delays.

And the low current ratio indicates a weak liquidity position for the company. It means that the company is insufficient to pay off current liabilities.

Some types of Companies with a current ratio below one can operate steadily and comfortably if their inventory turns into cash quickly and continuously than accounts payables due.

This metric also shows the number of times the company can cover its current liabilities by its current assets in one year. So the current ratio of the particular company is three, which means it can cover current liabilities three times by using its current assets.

Also, look at the company's past performance for better analysis. And even if it is one of the important parameters, the current ratio only measures the quantity of assets and not the quality of current assets, so investors should look at other metrics relative to the current ratio, like Quick Ratio, Debt to Assets, Accruals Ratio, Account Receivable Turnover Ratio, etc.,

Range |
Indicator |
Comments |
Screener at TSR |
---|---|---|---|

Above 5 |
Strong Bullish | Excessive Assets | Yes |

3.5 to 5 |
Bullish | Surplus Assets | Yes |

2.5 to 3.5 |
Mild Bullish | Sufficient Assets | Yes |

2 to 2.5 |
Neutral | Adequate Assets | Yes |

1 to 2 |
Mild Bearish | Shortfall in Assets | Yes |

0.5 to 1 |
Bearish | Insufficient Assets | Yes |

Below 0.5 |
Strong Bearish | Deficiency of Assets | Yes |

Efficiency Screener | Current Ratio 2 To 3 | Current Ratio 3 To 4 | Current Ratio 4 To 5 |