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Current ratio

The current ratio divides current assets by current liabilities and shows the company’s ability to pay debts due within a year. The current ratio measures how many times assets convertible to cash within a year (cash, receivables, inventory) cover debts due within a year.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Interpretation
  4. 4.Pitfalls
  5. 5.Frequently asked questions

Key points

  • It is the most basic indicator of short-term financial health.
  • 5–2 is generally seen as healthy; below 1 means short-term debt exceeds current assets and refinancing is needed.
  • inventory may not convert to cash quickly; the quick ratio is more conservative.

Formula / calculation

Current ratio = Current assets / Current liabilities. Yatırımcı.AI computes the quarterly current ratio from the KAP balance sheet and shows it on the stock ratios page.

Interpretation

A range of 1.5–2 is generally seen as healthy; below 1 means short-term debt exceeds current assets and refinancing is needed. A very high ratio can mean idle cash or bloated inventory.

Pitfalls

inventory may not convert to cash quickly; the quick ratio is more conservative. In sectors such as retail, operating with negative working capital is normal and a low ratio is not a problem. Quarter-end cash movements can temporarily change the ratio.

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Frequently asked questions

The current ratio divides current assets by current liabilities and shows the company’s ability to pay debts due within a year.

Current ratio = Current assets / Current liabilities. Yatırımcı.AI computes the quarterly current ratio from the KAP balance sheet and shows it on the stock ratios page.

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