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What is the formula to the current ratio? What is the formula to the debt ratio?...

What is the formula to the current ratio? What is the formula to the debt ratio? What analytical value regarding the company do these two ratios offer?

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Answer #1

Current Ratio = Current Assets / Current Liabilities

Debt Ratio = Total Debt / Total Assets

Current ratio represents the ratio of the assets that the company possesses in comparison to the liabilities of the company . Current ratio above 1 is always a good indicator of the financial position of the company and indicates that the company is in good health.

Debt ratio represents the value of debt of the company in comparison to the assets of the company . It indicates the value of debt that the company is having on its total assets or the amount of asset financed with the debt.

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