In this video, we discuss what is Current Ratio, current ratio formula, calculation of Current Ratio along with top Examples.

Current Ratio is calculated as Current Assets divided by Current Liability.

Current Ratio Formula = Current Assets / Current Liabilities

Current Ratio Interpretation
- If Current Assets is greater than Current Liabilities, then Current Ratio is greater than 1.0. It a good situation to be in.
- If Current Assets = Current Liabilities, then Ratio is equal to 1.0 then Current Assets are just enough to pay down the short-term obligations.
- If Current Assets less than Current Liabilities, then Ratio is less than 1.0. A problem situation at hands as the company does not have enough to pay for its short-term obligations.

In addition, in this video, we discuss the calculation of Current Ratio with examples, the effect of seasonality and its limitations.

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