The current ratio is calculated by dividing a company’s current assets by its current liabilities. Ratios of 1 or higher indicate short-term solvency.

A fundamental flaw in U.S. GAAP and IFRS financial reporting standards distorts the calculation of working capital and the current ratio, resulting in a significant understatement in most companies’ ...

A current ratio is an accounting formula that defines a company's ability to meet its immediate and short-term obligations. The current ratio, sometimes called the liquidity ratio or the working ...

When you’re evaluating a potential investment, you likely look at profitability and growth, but there is one fundamental concept you must master first: liquidity. Just as a household needs enough cash ...

Financial ratios are calculations that compare two (or more) pieces of financial data that are normally found in a company's financial statements. Ratios can be invaluable to investors making ...

A good assessment of a company’s liquidity is important because a decline in liquidity leads to a greater risk of bankruptcy. FASB describes liquidity as reflecting “an asset’s or liability’s nearness ...

How well can current assets cover current liabilities? Sean Ross is a strategic adviser at 1031x.com, Investopedia contributor, and the founder and manager of Free Lances Ltd. Amy is an ACA and the ...

A quick ratio below industry standard means that your company has a relatively lower liquidity position than its competitors on one of the three common liquidity ratios used by companies. The quick ...

The acid-test ratio is a financial metric that assesses a company’s ability to cover short-term liabilities with its most liquid assets. A higher acid-test ratio suggests a stronger liquidity position ...

The quick ratio, also known as the acid-test ratio, measures a company's ability to pay off its current debt. Current debt includes any liabilities coming due within a year, like accounts payable and ...

The defensive interval ratio (DIR) is a financial metric that can help investors assess a company's ability to meet its short-term operating expenses using its liquid assets. Also known as the basic ...

Discover how the cash asset ratio assesses company liquidity by dividing cash and marketable securities by current liabilities to measure short-term financial health.