Current cost accounting and Current ratio: Difference between pages
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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. | |||
== See also == | == See also == | ||
* [[ | * [[Current assets]] | ||
* [[Current liabilities]] | |||
* [[Liquidity]] | |||
* [[Quick ratio]] | |||
[[Category:Liquidity_management]] | |||
Revision as of 10:23, 9 October 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.
