Current Ratio = Current Assets / Current Liabilities Current Assets = Stock + Cash + Prepaid Expenses + Debtors = 2,40,000 + 55,000 + 5,000 + 2,00,000 = 5,00,000
Financial statement analysis is one of the most important steps in gaining an understanding of the historical, current, and potential profitability of a company. Financial analysis is also critical in evaluating the relative stability of revenues and earnings, the levels of operating and financial risk, and Current Ratio = Current Assets/Current Liabilities Current Ratio = 60,000/30,000 = 2:1 Working Capital = Current Assets - Current Liabilities = 60,000 - 30,000 = 30,000 Solution: (a) Calculate the current ratio and working capital based on the preliminary balance sheet.
Mar 02, 2011 · What is a Key Ratio? • A Key Ratio is a number, expressed in percentages, that is used as a guideline to measure Credit Union Performance. • Financial Soundness, Risk, and Strategic Direction of the Credit Union can be measured by ratios. • Ratio computation and utilization may be different for each Credit Union. Ratio formulas are most common in determining balance sheet totals. Some formulas are as follows: Current ratio = current assets divided by current liabilities; Quick ratio = (current assets minus inventories) divided by current liabilities; Working capital = current assets minus current liabilities The current ratio is calculated by taking total current assets and dividing by total current liabilities. Uses for Current Ratio The ratio is an indication of a firm’s market liquidity and ability to meet creditor’s demands. Quick ratio = (Cash and cash equivalents + Marketable securities + Short-term receivables) ÷ Current liabilities, or Quick ratio = (Current assets – Inventories – Prepayments) ÷ Current liabilities. Example. The following figures have been taken from the balance sheet of GHI Company. Liquidity ratio Description The company; Current ratio: A liquidity ratio calculated as current assets divided by current liabilities. Amazon.com Inc.’s current ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Current Ratio Calculator. Calculate your current ratio below. Current ratio is a comparison of current assets to current liabilities, calculated by dividing your current assets by your current liabilities. Potential creditors use the current ratio to measure a company's liquidity or ability to pay off short-term debts. Sep 14, 2015 · If your business has $2,750 in current assets and owes $1,174 in current liabilities (again, you can pull these figures from your company’s balance sheet) then the current ratio is: The quick ratio is calculated by adding cash, cash equivalents, short-term investments, and current receivables together then dividing them by current liabilities. Sometimes company financial statements don’t give a breakdown of quick assets on the balance sheet. In this case, you can still calculate the quick ratio even if some of the quick asset totals are unknown.