Current Ratio Calculator
Current assets over current liabilities, with the components itemised so you can see what the ratio is actually made of.
Work it out
Opens on a worked example. Change any line and every figure follows. Cost of goods sold and operating expenses go in before depreciation and amortisation.
Runs entirely in your browser. Nothing you enter is sent to us or stored.
Current ratio
2.40x
- Current ratio, deferred revenue excluded
- No deferred revenue was entered, so this is the same as the current ratio.
How it is worked out
| Ratio | Formula |
|---|---|
| Current ratio | Current assets / Current liabilities |
| Current ratio, deferred revenue excluded | Current assets / (Current liabilities - Deferred revenue) |
Cost of goods sold and operating expenses are entered before depreciation and amortisation, which are their own lines.
Related reading
Where the figures behind a ratio come from, and what it takes to trust them.
- Glossary
General Ledger
The general ledger is the master record of an entity's accounts, holding every posted debit and credit by account and period. Subledgers feed it, the chart of accounts defines its structure, and the trial balance is its summary.
- Glossary
Balance Sheet Reconciliation
Balance sheet reconciliation is the practice of reconciling every balance sheet account, not just cash, on a documented schedule with a named owner and risk tier per account. It is the close deliverable auditors test first, and account reconciliation is the technique it applies, account by account.
- Glossary
Variance Analysis
Variance analysis compares an actual result against a benchmark, usually budget, forecast, or prior period, and explains the difference with specific, evidenced causes. It is distinct from flux analysis, which reviews period-over-period fluctuations during the close.
- Free tool
Financial Ratio Calculators
Every ratio from one set of statements.
- Free tool
13-Week Cash Flow Forecast
What a ratio is a snapshot of, week by week.
The formula
Current ratio = Current assets / Current liabilities
What the number means
It is a rough test of whether a company can meet its obligations over the next year out of what it already holds. Rough is the operative word, and the composition matters more than the number.
A current ratio of 2.0 made of cash and receivables is not the same as a 2.0 made of slow inventory and a prepaid insurance balance. Inventory that does not sell is not liquidity, and the quick ratio exists to answer exactly this, which is why these two pages link to each other.
Deferred revenue is the trap in software and services. It sits in current liabilities, it depresses the current ratio, and it is not a claim on cash: it is work you owe, which costs the cost of delivery rather than the full amount. A subscription business with healthy cash can show a current ratio below 1.0 for this reason alone, and reading that as distress is a common and expensive mistake. The tool flags a deferred revenue balance and shows the ratio both ways.
A high current ratio is not automatically good. Capital sitting in receivables and inventory is capital not working. A ratio drifting upward is sometimes a company collecting more slowly and holding more stock, which is a ratio improving while the business gets worse.
Where it is genuinely load-bearing: loan covenants. Many credit agreements test a minimum current ratio quarterly, which makes it a number with consequences rather than an indicator. If that is why you are here, use the definition in the agreement, which will specify exactly what is included, and not this one.
A worked example
A seasonal equipment distributor whose current ratio is 2.4 in March and 1.1 in September, with no change in the health of the business, and what that means for a covenant tested on a fixed date.
Ratios are downstream
of the close.
Connected accounts, reconciled at zero tolerance, with statements for any period and any entity. Your team approves what the agents propose, and the numbers the ratios come from are ones you can sign.