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The Current Ratio

The cash ratio is a liquidity ratio that tells investors whether a company’s near-term assets are sufficient to cover its near-term liabilities. It is measured as Current Assets/Current liabilities. Using Plantronics as an example, at the end of 2006:

Current assets 328,349
Current liabilities 126,929
Current ratio 2.6x

This indicates that Plantronics has more than sufficient current assets to meet its current liabilities.

For more information, see all articles on: Financial Statement Analysis, Fundamental Analysis, Investing in Stocks, Ratio Analysis, Security Selection

See also:
  • The Quick Ratio
  • The Growth Duration Model
  • Liquidity Ratios
  • The Defensive Interval
  • The N-firm Concentration Ratio
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    This entry was posted on Wednesday, January 31st, 2007 at 10:35 am and is filed under Financial Statement Analysis, Fundamental Analysis, Investing in Stocks, Ratio Analysis, Security Selection. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

    3 Responses to “The Current Ratio”

    1. Liquidity Ratios - Financial Education - Everything You Need To Know About Finance Says:

      [...]     « The Current Ratio Asset Turnover [...]

      February 8th, 2007 at 1:02 pm

    2. The Quick Ratio - Financial Education - Everything You Need To Know About Finance Says:

      [...]     « The Defensive Interval The Current Ratio [...]

      February 8th, 2007 at 1:04 pm

    3. The Defensive Interval - Financial Education - Everything You Need To Know About Finance Says:

      [...] current ratio and quick ratio determine whether a company has sufficient near-term assets to cover its near-term [...]

      February 8th, 2007 at 1:06 pm

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