Formula
Current Ratio = Current Assets ÷ Current Liabilities
Calculation Example
If a company has $600,000 in current assets and $300,000 in current liabilities, Current Ratio = 600,000 ÷ 300,000 = 2.0
Data Source
Balance sheets, financial statements
Tracking Frequency
Monthly, Quarterly
Optimal Value
A ratio above 1.5 is generally good; varies by industry.
Minimum Acceptable Value
A very low ratio suggests liquidity risk, while a very high ratio may indicate inefficiency.
Benchmark
Industry benchmarks: Retail ~1.2-1.5, Manufacturing ~1.5-2.5
Recommended Chart Type
Bar chart (to compare across industries), Line chart (to track trends)
How It Appears in Reports
Displayed in financial reports to evaluate short-term financial stability.
Why Is This KPI Important?
Helps businesses assess whether they have enough assets to cover short-term liabilities.
Typical Problems and Limitations
Does not consider asset quality or timing of cash flows.
Actions for Poor Results
Reduce unnecessary liabilities, improve accounts receivable collection, optimize cash management.
Related KPIs
Quick Ratio, Working Capital, Accounts Payable Turnover
Real-Life Examples
A manufacturing firm improved its Current Ratio from 1.3 to 2.1 by streamlining inventory turnover.
Most Common Mistakes
Focusing solely on increasing the ratio without analyzing asset efficiency.
