Current ratio: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Administrator (CSV import) |
imported>Doug Williamson m (Edited from the Glossary for Wiki alignment) |
||
| Line 2: | Line 2: | ||
The current ratio gives a very rough indication of the liquidity (or solvency) of the reporting entity. | The current ratio gives a very rough indication of the liquidity (or solvency) of the reporting entity. | ||
If the current ratio were to fall below 1.0, this would indicate that the entity would not be able to meet its current liabilities out of its cash in hand and the proceeds of its other current assets. | If the current ratio were to fall below 1.0, this would indicate that the entity would not be able to meet its current liabilities out of its cash in hand and the proceeds of its other current assets. | ||
For example, if current assets are £5m and current liabilities are £4m, the Quick ratio = 5/4 = 1.25. | |||
== See also == | == See also == | ||
| Line 9: | Line 12: | ||
* [[Liquidity]] | * [[Liquidity]] | ||
* [[Quick ratio]] | * [[Quick ratio]] | ||
Revision as of 15:00, 28 March 2013
Current assets ÷ Current liabilities.
The current ratio gives a very rough indication of the liquidity (or solvency) of the reporting entity.
If the current ratio were to fall below 1.0, this would indicate that the entity would not be able to meet its current liabilities out of its cash in hand and the proceeds of its other current assets.
For example, if current assets are £5m and current liabilities are £4m, the Quick ratio = 5/4 = 1.25.
