current ratio unit 8/9

taskey

has anyone got an easy way to write this, as the example is have is x:1

i am trying to do some quick memory cards and just wondered what everyone else has done

Thanks

Tracy

Paul24

Current Assets

---

Current Liabilities


This is a liquidity ratio. It shows how many times your current assets cover your current liabilities and should therefore be at the very least 1.

taskey

thanks - that is what i wrote, but it seemed a bit too simple.

Tracy

[Deleted User]

Quick Current Ratio (acid test)

= (Current Assets - Stock) / Current Liabilities

I prefer this one as I believe that adding the stock doesn't give a true picture of the debtors strength against the creditors.

brett316

Current Ratio should ideally be 2:1 because of stock being difficult to turn into cash which is why acid test gives a better picture and should be 1:1 but also if current ratio is greater than 2:1 then the company is maybe not investing its assets properly