Current ratio

This query is : Resolved

Denan (Querist)
Follow

29 January 2015 need to know current ratio formula , if i use this formula what would be the benefit for the company,

why we are giving 2:1 why dont you give 2:0.98, & 5:1, if i use this ratio what would be the benefit for that

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
Follow

29 January 2015 Current ratio = current assets/current liabilities

Current ratio is a useful test of the short-term-debt paying ability of any business. A ratio of 2:1 or higher is considered satisfactory for most of the companies

A company with high current ratio may not always be able to pay its current liabilities as they become due if a large portion of its current assets consists of slow moving or obsolete inventories. On the other hand, a company with low current ratio may be able to pay its current obligations as they become due if a large portion of its current assets consists of highly liquid assets i.e., cash, bank balance, marketable securities and fast moving inventories.

Message likes : 1 times

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

ASHOK B GONDKAR

rana andcompany

Raj Jaggi

SHRI HARIRAO

Raviraj ponkshe

Subscribe Now

Current ratio

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

GST CONSULTANT

GST CONSULTANCY

Accountant

Senior Executive

Manager- Finance and Compliance

CA Final