Question

Current Ratio 2017 2016 2015 Current Ratio 1.78 1.97 2.29 How to analyse a company by...

Current Ratio

2017

2016

2015

Current Ratio

1.78

1.97

2.29

How to analyse a company by this ratio? Or what can these ratios tell us?

Business   Finance   
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Answer #1

Current ratio is a liquidity ratio that measures a firm's ability to pay its short-term obligations. It compares a firm's current assets to its current liabilities, and is expressed as follows:

current ratio helps investors and creditors understand the liquidity of a company and how easily that company will be able to pay off its current liabilities. So a current ratio of 4 means that the company has 4 times more current assets than current liabilities.

A higher current ratio is always more favorable than a lower current ratio because it shows the company can more easily make current debt payments.

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