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Current Ratio Calculator

See whether a business can pay its bills for the next year, with the current ratio and working capital, plus the quick and cash ratios.

Level: Grade 6

Printable worksheet

Current Ratio Calculator

Know the answer you need? Pick an input to work backward.

Inputs

Cash, receivables, inventory and other assets expected to turn into cash within a year.

Bills, short-term debt and other obligations due within a year.

Result

Current ratio

2

Current assets of $250,000.00 against current liabilities of $125,000.00 give a current ratio of 2 and working capital of $125,000.00; the quick ratio is 1.56.

Working capital
$125,000.00
Quick (acid-test) ratio
1.56
Cash ratio
0.24

See the step-by-step solution ↓

Step-by-step solution

  1. Divide current assets by current liabilities. This shows how many dollars you have for each dollar due this year

    $250,000.00$125,000.00=2

  2. Subtract to get working capital, the dollar cushion between the two

    $250,000.00−$125,000.00=$125,000.00

  3. Take out inventory and prepaid expenses, because they are slow or impossible to turn into cash. What is left is quick assets

    $250,000.00−$50,000.00−$5,000.00=$195,000.00

  4. Divide quick assets by current liabilities to get the quick (acid-test) ratio

    $195,000.00$125,000.00=1.56

  5. Divide cash by current liabilities to see how much of each dollar owed cash alone covers

    $30,000.00$125,000.00=0.24

Test yourself

20 quick questions built from this calculator's formula: work out results, predict what happens when an input changes, and work backward from an answer. Every answer comes with the working.

Please note: Results are estimates for planning and comparison. Lenders, banks, and tax authorities may round differently or include fees not modeled here, so confirm figures with your provider before deciding.

What this calculator does

Find out whether a business has enough on hand to pay the bills coming due this year. The current ratio asks a simple question. Say every bill due in the next year arrived today. How many dollars of short-term assets would the business have for each dollar it owes? Short-term (current) assets are things like cash and money customers owe. Bills due within a year are current liabilities. A ratio of 2 means current assets are twice current liabilities. Lenders and suppliers check this number early, to see if a company can pay them on time.

This calculator works out the current ratio and working capital from two totals on the balance sheet. Working capital is the gap between the two, in dollars. Add inventory and prepaid expenses to get the stricter quick ratio, also called the acid-test ratio. It ignores assets that can't be turned into cash quickly. Add cash to get the cash ratio, the strictest test of all. Seeing all three together shows something useful. You can see how much the company's ability to pay (its liquidity) depends on selling its stock.

Where it's used

Why this math matters outside the classroom:

  • Checking liquidity. A company with $150,000 of current assets and $100,000 of current liabilities has a current ratio of 1.5.
  • Quick ratio. Leaving inventory out of current assets shows whether short-term bills could be paid without selling stock on hand.
  • Working capital. Subtracting $100,000 of current liabilities from $150,000 of current assets leaves $50,000 of working capital.
  • Lender reviews. Lenders compare a borrower's current ratio with the minimum written into a loan agreement.

Grade level and standards: Grade 6; Common Core State Standards for Mathematics 6.RP.A.1. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.

How to use it

  1. Enter total current assets and total current liabilities from the same balance sheet.
  2. For the quick ratio, enter inventory and prepaid expenses. Leave either one blank if it doesn't apply.
  3. For the cash ratio, enter cash and cash equivalents.
  4. Read the current ratio, working capital and any of the stricter ratios you asked for.

What the inputs mean

Total current assets
Current assets are things expected to become cash, or be used up, within one year. They include cash, short-term investments and accounts receivable (money customers owe). Inventory and prepaid expenses count too.
Total current liabilities
Current liabilities are due within one year. They include accounts payable (bills owed to suppliers), and wages and taxes owed but not yet paid. Short-term loans count too, along with the part of long-term debt due in the next twelve months.
Inventory (optional, for quick ratio)
Goods held for sale, and raw materials. They count as current assets, but they may take months to sell, or sell only at a discount. So the quick ratio leaves them out.
Prepaid expenses (optional, for quick ratio)
Costs paid ahead of time, such as insurance or rent. They'll never come back as cash, so the quick ratio leaves them out too.
Cash and cash equivalents (optional, for cash ratio)
Cash on hand and in the bank, plus very short-term investments that can be cashed in almost at once. It can't be more than current assets once inventory and prepaid expenses are taken out.

Formula and method

current ratio = current assets ÷ current liabilities
working capital = current assets − current liabilities
quick ratio = (current assets − inventory − prepaid expenses) ÷ current liabilities
cash ratio = cash and cash equivalents ÷ current liabilities

All three ratios divide by the same thing, current liabilities. They differ only in which assets they count. The current ratio counts every current asset. The quick ratio keeps only cash, short-term investments and receivables. The cash ratio keeps only cash. Each step down is a stricter test of how easily the business could pay its short-term bills.

Working capital shows the same comparison in dollars instead of as a ratio. A current ratio above 1 always means positive working capital. A ratio below 1 always means negative working capital.

Worked example

A company has $250,000 of current assets, including $50,000 of inventory, $5,000 of prepaid expenses and $30,000 of cash. Its current liabilities are $125,000.

  1. Current ratio: $250,000 ÷ $125,000 = 2.00.
  2. Working capital: $250,000 − $125,000 = $125,000.
  3. Quick assets: $250,000 − $50,000 − $5,000 = $195,000, so the quick ratio is $195,000 ÷ $125,000 = 1.56.
  4. Cash ratio: $30,000 ÷ $125,000 = 0.24.

Result: The current ratio is 2.00, with $125,000 of working capital. Without inventory and prepaid expenses, the quick ratio is 1.56. Cash alone covers 0.24 of each dollar owed.

Understanding the result

A current ratio below 1 means the business owes more in the short term than it has in short-term assets. It would need new cash to pay its bills as they come due. That cash could come from sales, borrowing or the owners. A ratio somewhere between about 1.2 and 2 is often seen as comfortable. But what's normal depends a lot on the industry.

A very high ratio isn't always good. It can mean cash sitting idle, customers who are slow to pay, or extra stock that isn't selling.

A big gap between the current and quick ratios shows that the ability to pay depends on inventory. That's normal for a store. But it's worth watching if stock sells slowly or can spoil.

Assumptions and limitations

  • All figures come from the same balance-sheet date.
  • Inventory, prepaid expenses and cash are already part of total current assets.
  • Ratios aren't rounded along the way, and they're shown to two decimal places.
  • A balance sheet is a snapshot of one day. Seasonal businesses can show very different ratios at different times of year.
  • Money owed by customers (receivables) is counted in full. The calculator can't tell whether customers will actually pay.
  • Some analysts count quick assets as cash plus short-term investments plus receivables. That gives the same answer only when current assets hold nothing else besides inventory and prepaid expenses.

Frequently asked questions

What is a good current ratio?

There's no single cutoff. Above 1 means short-term assets cover short-term debts. Many businesses aim for somewhere around 1.5 to 2. But companies that collect cash quickly and sell stock fast can run safely with lower ratios. Comparing with similar businesses, and with the company's own past, is more useful than any fixed number.

What is the difference between the current ratio and the quick ratio?

The quick ratio leaves out inventory and prepaid expenses. It counts only assets that can be turned into cash quickly. It shows whether the business could pay its bills without relying on selling stock.

Can the current ratio be too high?

Yes. A very high ratio can mean the business holds more cash or inventory than it needs. Or it can mean customers are slow to pay. That money might earn more if it were put back into the business or returned to the owners.

How does working capital relate to the current ratio?

They use the same two numbers. Working capital subtracts one from the other, in dollars. The current ratio divides one by the other. Working capital shows how big the cushion is. The ratio lets you compare companies of different sizes.

How this calculator is checked

Method: Standard liquidity ratio definitions: current assets ÷ current liabilities; quick ratio excluding inventory and prepaid expenses; cash ratio; working capital as the difference. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-18. Found a problem? Tell us.

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