# current ratio

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## Current ratio

Indicator of short-term debt-paying ability. Determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company.

## Cash Asset Ratio

A ratio of a company's cash and liquid assets to its total liabilities. A cash asset ratio measures a company's liquidity and how easily it can service debt and cover short-term liabilities if the need arises. As a result, potential creditors use this ratio in determining whether or not to make short-term loans. It is also called the liquidity ratio and the current ratio.

## Cash Ratio

1. A ratio of a company's cash and liquid assets to its total liabilities. A cash ratio is a measure of company's liquidity and how easily it can service debt and cover short-term liabilities if the need arises. As a result, potential creditors use this ratio in determining whether or not to make short-term loans. It is also called the liquidity ratio and the cash asset ratio.

2. In banking, a ratio of a bank's cash and cash equivalents to its demand deposits. See also: Reserve requirement.

## current ratio

A measure of a firm's ability to meet its short-term obligations. The current ratio is calculated by dividing current assets by current liabilities. Both variables are shown on the balance sheet. A relatively high current ratio compared with those of other firms in the same business indicates high liquidity and generally conservative management, although it may tend to result in reduced profitability. See also cash ratio, quick ratio.

or

## acid-test ratio

an accounting measure of a firm's ability to pay its short-term liabilities out of its quickly-realizable CURRENT ASSETS, which expresses the firm's liquid current assets (DEBTORS plus cash) as a ratio of CURRENT LIABILITIES. Sometimes called the ‘quick ratio’, this is a more stringent test of liquidity than the WORKING CAPITAL RATIO, because it excludes STOCK from CURRENT ASSETS on the grounds that STOCKS cannot be as readily convertible into cash to meet short-term debts as can DEBTORS where the goods or services have already been sold and only collecting the money remains.
References in periodicals archive ?
Business commentators refer to a healthy Current Ratio of 2:1 (which means the business has current assets of \$2 for every \$1 of current liabilities).
Furthermore, financial statement users cannot ascertain what a company's current ratio was even the day before the financial statement date.
While similar to the current ratio, a quick ratio measures only the cash available to pay current bills.
Because the current ratio and the working capital amount can create an illusion of favorable liquidity when none may exist, many analysts also calculate the quick ratio.
AMM--Amcom Telecommunications Limited 2007 2008 2009 2010 2011 Current Ratio 0.
If receivables are turned over quickly, then the quick ratio and current ratio are considered reliable measures of meeting current obligations.
After simplifying and collecting terms, the output voltage to input current ratio (signal gain) can be written as:
In order to study the reaction of auditors to a distribution that was not skewed, the industry information relating to the current ratio was transformed into a normal distribution.
A current ratio of 2 simply says that at the balance sheet date, the firm had \$2 of current assets for every \$1 of current liabilities outstanding.
GAAP/IFRS financial reporting standards distorts the calculation of working capital and the current ratio, understating the liquidity of most companies.
We examined the Current Ratio (current assets/current liabilities), a measure of liquidity, and the Debt Ratio (total liabilities/total assets), a measure of solvency, for two large sets of public companies categorized as Small Companies and Large Companies.

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