Under these types of ratios, a current ratio Current Ratio The current ratio is a liquidity ratio that measures how efficiently a company can repay it’ short-term loans within a year. Current ratio = current assets/current liabilities read more lower than 1 indicates the company may not be able to meet its short term obligations on time.
The formula is net income, divided by total assets. There are significant limitations on the use of financial ratios, which are as follows: The information used for a ratio is as of a specific point in time or reporting period, which may not be indicative of long-term trends.
Liquidity Ratios. Liquidity ratios are financial ratios that measure a company’s ability to repay both short- and long-term obligations. Common liquidity ratios include the following: The current ratio Current Ratio Formula The Current Ratio formula is = Current Assets / Current