Current Ratio
Returns the current ratio for a company, which measures its ability to pay short-term obligations. The current ratio is calculated as:
Current Ratio = Current Assets / Current Liabilities
A ratio above 1.0 indicates the company has more current assets than current liabilities, suggesting good short-term liquidity.
Interpretation
| Range | Interpretation |
|---|---|
| > 2.0 | Strong liquidity, possibly inefficient asset use |
| 1.5 - 2.0 | Healthy liquidity |
| 1.0 - 1.5 | Adequate liquidity |
| < 1.0 | Potential liquidity concerns |
Notes
- Industry standards vary; banks typically have lower ratios
- Compare with peers in the same industry
- Use alongside quick ratio for better analysis
Examples
=current_ratio("AAPL")=current_ratio("MSFT")=current_ratio("JPM")=current_ratio(A1)When to Use
- Evaluating a company's short-term liquidity
- Comparing liquidity across companies in the same industry
- Screening for financially healthy companies
- Credit analysis and lending decisions
- Quick financial health assessment
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Need stricter liquidity measure | quick_ratio() |
| Analyzing long-term solvency | debt_to_equity() |
| Historical ratio data | hf_current_ratio() |
| Cash-only liquidity | cash_ratio() |
Common Issues & FAQ
Q: Why is the current ratio below 1? A: A ratio below 1 means current liabilities exceed current assets. This is common for:
- Banks and financial institutions
- Companies with strong cash flows
- Businesses with fast inventory turnover
Q: What is a good current ratio? A: Generally 1.5-2.0 is considered healthy, but this varies by industry. Compare with industry peers.
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