Current Ratio Formula

Current Ratio Formula

Current ratio tells about the liquidity position of the entity. Current ration can be calculated by dividing current asset with current liabilities of the organization.

Current Ratio =   Current Asset    .   

                         Current Liabilities

Example

Stock = 10,000

Debtor= 5,000

Cash = 20,000

Creditor= 25,000

Calculate Current Ration

Solution

Current asset

Stock = 10,000

Debtor= 5,000

Cash = 20,000

           35,000

Current Ratio =   Current Asset    

                         Current Liabilities

=35,000/25,000

=1.4:1