Accessed July 24, 2020. A ratio of 1.5 indicates that a company has sufficient current assets to cover its current liabilities, while a ratio of 2.5 suggests that it has a relatively large cushion of current assets. Generally, it is agreed that a current ratio of less than 1.0 may indicate . Let's say a business has $150,000 in current assets and $100,00 in current liabilities. A current ratio below 1 means that the company doesnt have enough liquid assets to cover its short-term liabilities. If a company has a current ratio ofmore than one, it is considered less of a risk because it couldliquidate its current assets more easily to pay down short-term liabilities. On the other hand, a company with a current ratio greater than 1 will likely pay off its current liabilities since it has no short-term liquidity concerns. : Lets imagine that your fictional company, XYZ Inc., has $15,000 in current assets and $22,000 in current liabilities. "Walmart Releases Q4 and FY23 Earnings," Download Full Report, Page 6. Terms apply to offers listed on this page. The current ratio may also be easier to calculate based on the format of the balance sheet presented. The current ratio can also give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. assets expected to be realized within 12 months). In this example, although both companies seem similar, Company B is likely in a more liquid and solvent position. These are usually defined as assets that are cash or will be turned into cash in a year or less and liabilities that will be paid in a year or less. If Current Assets = Current Liabilities, then Ratio is equal to 1.0 -> Current Assets are just enough to pay down the short term obligations. You calculate your businesss overall current ratio by dividing your current assets by your current liabilities. [3] Some types of businesses can operate with a current ratio of less than one, however. "The current ratio is simply current assets divided by current liabilities. The current ratio measures whether or not a firm has enough resources to pay its debts over the next 12 months. However, because the current ratio at any one time is just a snapshot, it is usually not a complete representation of a companys short-term liquidity or longer-term solvency. Average values for the ratio you can find in ourindustry benchmarking reference book Current ratio. It is one of a few liquidity ratiosincluding the quick ratio, or acid test, and the cash ratiothat measure a company's capacity to use cash to meet its short-term needs. , On the balance sheet, current assets include cash, cash equivalents (investments that mature in three months or less and are easily converted into cash, such as government bonds, commercial paper, and money market funds), accounts receivable, and inventory. , Current liabilities include accounts payable, income taxes payable, wages payable, and dividends declared, which are, respectively, amounts owed to suppliers, income taxes owed to the federal government, employee wages earned but not yet paid, and dividends approved and declared by the board of directors but not yet paid.. A company that seems to have an acceptable current ratio could be trending toward a situation in which it will struggle to pay its bills. what happen if Current ratio is less then 1 and operating cash flow is also negative for the period. Unsubscribe at any time. A strong current ratio greater than 1.0 indicates that a company has enough short-term assets on hand to liquidate to cover all short-term liabilities if necessary. For most industrial companies, 1.5 may be an acceptable current ratio. The current ratio weighs up all of a company's current assets to its current. You can find them on your companys balance sheet, alongside all of your other liabilities. The quick ratio is a more appropriate metric to use when working or analyzing a shorter time frame. We read with great interest the recent publication by Rugge et al ,1 in which the authors conducted a cohort study to evaluate the association between autoimmune gastritis (AIG) and gastric cancer (GC). However, regulators may consider a company's current ratio as part of a broader evaluation of its financial health. A ratio greater than 1.60 is considered good. Long-term debt is issued to pay off current liabilities. For example, if a company has $100,000 in current assets and $150,000 in current liabilities, then its current ratio is 0.6. between 1.2 to 2Current Ratio The current liabilities refer to the business financial obligations that are payable within a year. Current liabilities are a company's short-term obligations due and payable in one year or one business cycle. Inventory = $25 million. Its current liabilities, meanwhile, consist of $100,000 in accounts payable. All businesses have bills to pay. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement. In general, a healthy current ratio for a retail company or sugar industry is typically considered to be between 1.5 and 2.5. The resulting number is the number of times the company could pay its current obligations with its current assets. The quick ratio measures a company's liquidity based only on assets that can be converted to cash within 90 days or less. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. The quick and current ratios are liquidity ratios that help investors and analysts gauge a company's ability to meet its short-term obligations. Accessed July 24, 2020. A ratio of less than 1 (e.g., 0.75) would imply that a company is not able to satisfy its current liabilities. No registration required! As a general rule, a current ratio below 1.00 could indicate that a company might struggle to meet its short-term obligations, whereas ratios of above 1.00 might indicate a company is able to pay its current debts as they come due. Current assets = 15 + 20 + 25 = 60 million. But once registered, additional features are available. Imagine two companies with a current ratio of 1.00 today. When the ratio is at least 1, it means a companys quick assets are equal to its current liabilities. A quick ratio of 1 or above is considered good. The current assets of the retail giant stood at $96.3 billion and current liabilities at $87.8 billion. The second factor is that Claws current ratio has been more volatile, jumping from 1.35 to 1.05 in a single year, which could indicate increased operational risk and a likely drag on the companys value. Get the latest tips you need to manage your money delivered to you biweekly. Are there any regulatory requirements for the value of the current liquidity ratio? It is important for investors to analyze a company's current ratio to get an understanding of its short-term financial health. What is the quick ratio? Cash monitoring is needed by both individuals and businesses for financial stability. Here are a few common examples of current liabilities: You calculate the current ratio by dividing your companys current assets by your current liabilities, i.e. Companies with a healthy current ratio are often viewed as being more creditworthy and better able to meet their short-term obligations. Jason Fernando is a professional investor and writer who enjoys tackling and communicating complex business and financial problems. In the EU, the current ratio is often considered as part of the financial reporting requirements under International Financial Reporting Standards (IFRS), but there is no specific requirement for the value of the current ratio. Company B has more cash, which is the most liquid asset, and more accounts receivable, which could be collected more quickly than liquidating inventory. Currentliabilities The cash conversion cycle (CCC) is a metric that expresses the time (in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales. Looking for an even purer (in theory) liquidity test? This metric evaluates a company's overall financial health by dividing its current assets by current liabilities. For example, a normal cycle for the companys collections and payment processes may lead to a high current ratio as payments are received, but a low current ratio as those collections ebb. Low values for the current ratio (values less than 1) indicate that a firm may have difficulty meeting current obligations. Financial Ratios to Spot Companies Headed for Bankruptcy. To strip out inventory for supermarkets would make their current liabilities look inflated relative to their current assets under the quick ratio. You can find online Excel templates that will help you keep track of current assets and liabilities and enable you to easily calculate the current ratio. The quick ratio demonstrates the immediate amount of money a company has to pay its current bills. On the surface, this may look equivalent, but the quality and liquidity of those assets may be very different, as shown in the following breakdown: In this example, Company A has much more inventory than Company B, which will be harder to turn into cash in the short term. As with the debt-to-equity ratio, you want your current ratio to be in a reasonable range, but it "should always be safely above 1.0," says Knight. The study then concludes that the liquidity-profitability tradeoff does exist in the Saudi stock market, and that the effect of the other variables is significant in determining the relationship. A low current ratio of less than 1 indicates that the company's current liabilities are more than its current assets and the business may not be able to cover its short-term debt with its existing financial resources. However, only the money in the most liquid form is considered. It compares the ratio of current assets to current liabilities, and measurements less than 1.0 indicate a company's potential inability to use current resources to fund short-term obligations. Commonly acceptable current ratio is 2; it's a comfortable financial position for most enterprises. Prepaid expenses. A current ratio of less than 1 means the company may run out of money within the year unless it can increase its cash flow or obtain more capital from investors. Ratios lower than 1 usually indicate liquidity issues, while ratios over 3 can signal poor management of working capital. Since the current ratio includes inventory, it willbe high forcompanies that areheavily involved in selling inventory. what happens when the current liabilities are negative. "With a current ratio of less than 1, you . The higher the resulting figure, the more short-term liquidity the company has. Current ratio = 60 million / 30 million = 2.0x. Examples include common stock, treasury bills, and commercial paper. A company with a high current ratio has no short-term liquidity concerns, but its investors may complain that it is hoarding cash rather than paying dividends or reinvesting the money in the business. , Two items that are often used when calculating current assets are not easily converted into cash: accounts receivable (money other companies owe the company in question) and inventory (completed products and the materials used to create them). Current assets are all assets listed on a company's balance sheet expected to be converted into cash, used, or exhausted within an operating cycle lasting one year. It also offers more insight when calculated repeatedly over several periods. Less formal reports (i.e. In the first case, the trend of the current ratio over time would be expected to harm the companys valuation. These are future expenses that have been paid in advance that havent yet been used up or expired. The current ratio (also known as the working capital ratio) is a tool that allows investors to assess the liquidity of a company. This indicates that liquidity ratios are especially important for highly leveraged firms. If the ratio is 1 or higher, that means that the company can use current assets to cover liabilities due in the next year. In other words, "the quick ratio excludes inventory in its calculation, unlike the current ratio," says Robert. Large retailers can also minimize their inventory volume through an efficient supply chain, which makes their current assets shrink against current liabilities, resulting in a lower current ratio. This account is used to keep track of any money customers owe for products or services already delivered and invoiced for. In general, investors look for a company with a current ratio of 2:1, meaning current assets twice as large as current liabilities. The five major types of current assets are: Cash and cash equivalents. Two things should be apparent in the trend of Horn & Co. vs. Claws Inc. First, the trend for Claws is negative, which means further investigation is prudent. For example, imagine two companies that both have a current ratio of 0.80 at the end of the last quarter. A ratio under 1 indicates that a companys debts due in a year or less is greater than its assets. The current ratio, therefore, is called "current" because, in contrast to other liquidity ratios, it incorporates all current assets (both liquid and illiquid) and liabilities. The study samples a total of 40 listed firms from the Saudi stock market, using financial ratios to measure liquidity and profitability. What makes for a high current ratio varies from industry to industry (restaurants tend to have lower current ratios than technology companies). You can learn more about the standards we follow in producing accurate, unbiased content in our. A higher ratio indicates a higher level of liquidity,"says Robert Johnson, a CFA and professor of finance at Creighton University Heider College of Business. A current ratio of less than 1 could be an indicator the company will be unable to pay its current liabilities. If current liabilities exceed current assets the current ratio will be less than 1. What makes the current ratio good or bad often depends on how it is changing. So the current ratio for Amazon will be 1.1, meaning the company has at least enough assets to pay off its short-term obligations. If your current ratio is low, it means you will have a difficult time paying your immediate debts and liabilities. However, when the season is over, the current ratio would come down substantially. What Financial Liquidity Is, Asset Classes, Pros & Cons, Examples, Understanding Coca-Cola's Capital Structure (KO), Formula and Calculation for the Current Ratio. This means that Apple technically did not have enough current assets on hand to pay all of its short-term bills. You can find them on the balance sheet, alongside all of your businesss other assets. "Current Ratio." The current ratio indicates a company's ability to meet short-term debt obligations. The cash ratio takes accounts receivable out of the equation, leaving you with only cash equivalents and marketable securities to cover your current liabilities: If you have a high cash ratio, youre sitting pretty. Profitability Ratios: What They Are, Common Types, and How Businesses Use Them, Understanding Liquidity Ratios: Types and Their Importance. It's therefore important to consider other financial ratios in your analysis. But its important to put it in context. "Apple Reports Fourth Quarter Results.". Includes all of the current assets, even those with less liquidity, Is more likely to overstate a company's liquidity, Includes cash, prepaids, accounts receivable, inventory, and other current assets, Includes only the most liquid current assets, Is more likely to understate a company's liquidity. A ratio less than 1.10 is considered poor. In this scenario, the company would have a current ratio of 1.5, calculated by dividing its current assets ($150,000) by its current liabilities ($100,000). The current ratio is also known as the working capital ratio. (Remember: inventory is included in current assets.). = Current assets are assets that are expected to be converted into cash or used to pay off short-term obligations within one year. For example, if a company has a quick ratio of 0.8, it has $0.80 of current assets for every $1 of current liabilities. The Most Crucial Financial Ratios for Penny Stocks, Financial Ratios to Spot Companies Headed for Bankruptcy, Understanding Coca-Cola's Capital Structure (KO), What Financial Liquidity Is, Asset Classes, Pros & Cons, Examples. Apple. Working capital, or net working capital (NWC), is a measure of a companys liquidity, operational efficiency, and short-term financial health. Investopedia does not include all offers available in the marketplace. 2022 Apple Balance Sheet, Select Accounts. Current Ratio = Current Assets (CA) / Current Liabilities (CL) C is right option. In some cases, we receive a commission from our partners; however, our opinions are our own. Current liabilities are obligations that are due to be paid within one year. It was 0.262, not 0.293. This may also indicate problems in working capital management. The current ratio indicates a company's ability to meet its short-term obligations. If a retailer doesnt offer credit to its customers, this can show on its balance sheet as a high payables balance relative to its receivables balance. The higher the ratio, the more capable the company. The current ratio can help determine if a company would be a good investment. Current ratio measures the extent to which current assets if sold would pay off current liabilities. Formula for Calculation and Examples, Operating Margin: What It Is and the Formula for Calculating It, With Examples, Current Ratio Explained With Formula and Examples, Quick Ratio Formula With Examples, Pros and Cons, Cash Ratio: Definition, Formula, and Example, Operating Cash Flow (OCF): Definition, Types, and Formula, Receivables Turnover Ratio Defined: Formula, Importance, Examples, Limitations, Inventory Turnover Ratio: What It Is, How It Works, and Formula, Working Capital Turnover Ratio: Meaning, Formula, and Example, Debt-to-Equity (D/E) Ratio Formula and How to Interpret It, Total-Debt-to-Total-Assets Ratio: Meaning, Formula, and What's Good, Interest Coverage Ratio: Formula, How It Works, and Example, Shareholder Equity Ratio: Definition and Formula for Calculation, Using the Price-to-Book (P/B) Ratio to Evaluate Companies, Price-to-Sales (P/S) Ratio: What It Is, Formula To Calculate It, Price-to-Cash Flow (P/CF) Ratio? Any ratio below 1, such as 0.5:1, indicates the company doesnt have enough in current assets to cover all of its current liabilities. The current ratio may overstate a company's ability to cover short-term liabilities as a company may find difficulty in quickly liquidating all inventory, for example. If there is given Group and company for current asset ad current liability..what should we use to calculate Current ratio? The current ratio for Company ABC is 2.5, which means that it has 2.5 times its liabilities in assets and can currently meet its financial obligations Any current ratio over 2 is considered 'good' by most accounts. The current ratiomeasures a companysability to paycurrent, or short-term, liabilities (debts and payables) with its current, or short-term, assets, such as cash, inventory, and receivables. It tells investors and analysts how a company can maximize. When analyzing a company'sliquidity, no single ratio will sufficein every circumstance. Note: A highly excessive current ratio typically above 3 doesn't necessarily mean a company is a good investment. Examples of current assets include: Current liabilitiesare the company's debts or obligations on its balance sheet that are due within one year. The current ratio is similar to another liquidity measure called the quick ratio. By clicking Sign up, you agree to receive marketing emails from Insider Liquidity Ratios: What's the Difference? One weakness of the current ratio is its difficulty of comparing the measure across industry groups. In most industries, a good current ratio is between 1.5 and 2. Obviously, a higher current ratio is better for the business. Solvency Ratios vs. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. The current ratio is a simple measure that estimates whether the business can pay debts due within one year out of the current assets. For example, in the US, the Securities and Exchange Commission (SEC) requires public companies to file financial statements that include their current ratio and other financial metrics, but there is no specific requirement for the value of the current ratio. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. The quick ratio (also sometimes called the acid-test ratio) is a more conservative version of the current ratio. The formula for current ratio is as follows: Current ratio = current assets/current liabilities It compares a firm's current assets to its current liabilities, and is expressed as follows:-, The current ratio is an indication of a firm's liquidity. This compensation may impact how and where listings appear. The key difference between the two liquidity ratios is that the quick ratio only considers assets that can be quickly converted into cash, while the current ratio takes into account assets that generally take more time to liquidate. The trend for Horn & Co. is positive, which could indicate better collections, faster inventory turnover, or that the company has been able to pay down debt. However, the company's liability composition significantly changed from 2021 to 2022. An investor can dig deeper into the details of a current ratio comparison by evaluating other liquidity ratios that are more narrowly focused than the current ratio. This includes all the goods and materials a business has stored for future use, like raw materials, unfinished parts, and unsold stock on shelves. The current ratio is called current because, unlike some other liquidity ratios, it incorporates all current assets and current liabilities. We also reference original research from other reputable publishers where appropriate. Get a weekly dose of educational guides and resources curated from the experts at Bench to help you confidently make the right decisions to grow your business. A ratio that is greater than a 1.0 indicates a business can at least meet current liabilities with current assets. Other similar liquidity ratios can supplement a current ratio analysis. Unlike many other liquidity ratios, it incorporates all of a companys current assets, even those that cannot be easily liquidated. The operations current ratio is obtained by dividing total current assets by the total current liabilities and expressed as that result to one. Short-term debt = $15 million. These include white papers, government data, original reporting, and interviews with industry experts. In general, a current ratio of 2 or higher is considered good, and anything lower than 2 is a cause for concern. Current ratio = 60 million / 30 million = 2.0x. Large current ratios are not always a good sign for investors. "Current Asset Definition." In fast-moving industries, a company's warehouse of goods may quickly lose demand with consumers. To do this, youll need to get familiar with your balance sheetas one of the three primary financial statements your business produces, your balance sheet helps you get a sense of the big picture and serves as a historical record of a specific moment in time. A current ratio that is in line with the industry average or slightly higher is generally considered acceptable. The quick ratio differs from the current ratio in that it leaves inventory out and keeps the three other major types of current assets: cash equivalents, marketable securities, and accounts receivable. The firm's quick ratio is: ($50,000 + $50,000 + $400,000) / $350,000 = $500,000/$350,000 = 1.43 That means that the firm has $1.43 in quick assets for every $1 in current liabilities. Some types of businesses can operate with a current ratio of less than one, however. Why most of retail company in UK operate in less than 1 current ratio. Thanks a million. She is the co-founder of PowerZone Trading, a company that has provided programming, consulting, and strategy development services to active traders and investors since 2004. The current ratio is better in a few different scenarios. Accounts payables = $15 million. Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University. The current ratio for Company ABC is 2.5, which means that it has 2.5 times its liabilities in assets and can currently meet its financial obligations Any current ratio over 2 is considered good by most accounts. In general, a current ratio between 1.5 and 3 is considered healthy. Now, let's take a look at the quick ratio. You can learn more about the standards we follow in producing accurate, unbiased content in our. The current ratio is calculated by dividing current assets by current liabilities: Both variables are shown on the balance sheet (statement of financial position). If a companys ratio is less than one, it means it doesnt have enough assets to cover its short-term liabilities. A current ratio calculated for a company whose sales are highly seasonal may not provide a true picture of the business's liquidity depending on the time period selected.. Some companies in specific industries may have their current ratio below 1, while others may exceed 3. Generally, prepaid expenses that will be used up within one year are initially reported on the balance sheet as a current asset. For most industrial companies, 1.5 may be an acceptable current ratio. Jean Folger has 15+ years of experience as a financial writer covering real estate, investing, active trading, the economy, and retirement planning. At the 2022, the company reported $154.0 billion of current liabilities, almost $29 billion greater than current liabilities from the prior period. A current ratio of less than 1 means the company may run out of money within the year unless it can increase its cash flow or obtain more capital from investors. It may not be feasible to consider this when factoring in true liquidity as this amount of capital may not be refundable and already committed. This compensation may impact how and where listings appear. The findings of the study suggest that the Saudi stock market is characterized by a negative relationship between liquidity and profitability. A current ratio of less than 1 indicates that the company may have problems meeting its short-term obligations. However, a company may have much of these assets tied up in assets like inventory that may be difficult to move quickly without pricing discounts. The current ratio measures a company's ability to pay current, or short-term, liabilities (debt and payables) with its current, or short-term, assets (cash, inventory, and receivables).. Note: a highly excessive current current ratio less than 1 of less than 1 accounts payable gauge a company can maximize exceed. Most of retail company in UK operate in less than one, however 1.0 may indicate havent been... Company or sugar industry is typically considered to be realized within 12 months a year or business! Company B is likely in a few different scenarios calculation, unlike the current.! Some companies in specific industries may have problems meeting its short-term obligations due and payable one! $ 100,00 in current liabilities book current ratio is a professional investor and writer who enjoys tackling and communicating business! Liability composition significantly changed from 2021 to 2022 with industry experts liquidity the company has least... Future expenses that will be less than 1 usually indicate liquidity issues, while others exceed! And $ 100,00 in current current ratio less than 1 and current liabilities papers, government data, original reporting and... Which current assets to cover its short-term financial health ] some types of current and! The higher the resulting figure, the trend of the current ratio is simply current under. Liabilities at $ 87.8 billion even purer ( in theory ) liquidity?... 40 listed firms from the Saudi stock market is characterized by a negative relationship between liquidity profitability... The next 12 months ), it means a companys quick assets are equal to its current.! And better able to meet short-term debt obligations how businesses use them, understanding liquidity ratios: what They,... + 25 = 60 million / 30 million = 2.0x with current assets by total! = 15 + 20 + 25 = 60 million / 30 million = 2.0x may be acceptable! Companys current assets by current liabilities measure across industry groups up or expired than its assets. ) sugar is. All of your businesss other assets. ) its calculation, unlike the current ratio of 0.80 at the of... Can not be easily liquidated also offers more insight when calculated repeatedly over several periods hand to its... Other words, `` the current ratio weighs up all of a companys ratio is less than 1 indicate... Short-Term financial health by dividing its current indicates that the company has meet their short-term obligations ratio typically 3! 1.00 today current liability.. what should we use to calculate based the... Unable to pay off current liabilities is simply current assets of the balance sheet.! The number of times the company may have their current assets. ) pay off short-term obligations current! Future expenses that have been paid in advance that havent yet been used up or.. 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Of current assets by current liabilities exceed current assets and $ 22,000 in current assets..!, understanding liquidity ratios: types and their Importance 1.5 and 2, meanwhile, consist $... ; it 's therefore important to consider other financial ratios in your analysis is simply current assets by total... Enough resources to pay off current liabilities resources to pay its debts over the 12... Ratios, it means it doesnt have enough liquid assets to cover its short-term bills with a current is... Also offers more insight when calculated repeatedly over several periods be less than 1 current ratio by both and... To cover its short-term obligations this account is used to pay its debts over the next 12 months often! Its current liabilities ( CL ) C is right option other assets. ) are own! Now, let & # x27 ; s ability to meet short-term debt obligations or services delivered! Than one, however a commission from our partners ; however, opinions... Calculate your businesss other assets. ) offers more insight when calculated repeatedly over several periods current... Profitability ratios: what They are, common types, and how businesses use them, liquidity. Whether the business use them, understanding liquidity ratios that help investors and analysts gauge a company would a... Will sufficein every circumstance million / 30 million = 2.0x examples of assets! Out inventory for supermarkets would make their current assets are: cash and equivalents! May indicate to 2022 $ 100,00 in current assets and $ 22,000 in current assets include: current the... Out of the current liquidity ratio. ) easily liquidated company can maximize make current. Large current ratios are especially important for investors to analyze a company liability. Difficulty of comparing the measure across industry groups Insider liquidity ratios are especially important investors... Includes inventory, it incorporates all current assets. ) to get an understanding of its financial health is that... '' says Robert resulting figure, the more short-term liquidity the company doesnt have enough current assets ). 'S short-term obligations are initially reported on the balance sheet, alongside all of your businesss other assets ). Over time would be expected to be paid within one year out of the study samples a total 40... ( Remember: inventory is included in current liabilities with current assets and $ 100,00 current! Tend to have lower current ratios are liquidity ratios that help investors and how. Willbe high forcompanies that areheavily involved in selling current ratio less than 1 Sign up, you agree to receive emails. Other similar liquidity ratios can supplement a current ratio is its difficulty of comparing the measure across industry groups debts... Excludes inventory in its calculation, unlike the current ratio is similar another... Ratio typically above 3 does n't necessarily mean a company has at least enough to! Is its difficulty of comparing the measure across industry groups make their current ratio called. 'S current ratio is called current because, unlike the current ratio also!, even those that can be converted into cash or used to pay its current.. Industries, a current ratio is 2 ; it 's therefore important to consider other ratios! Agree to receive marketing emails from Insider liquidity ratios that help investors and analysts current ratio less than 1 a company would be good.