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Financial statements
What the company can convert to cash within a year, against what it owes within a year.
It answers the plainest question about a business: can it pay its bills over the next twelve months.
Below one means near-term obligations exceed near-term resources, which is not fatal but needs explaining.
| Below 1 | Near-term bills exceed near-term resources. |
|---|---|
| 1 to 2 | Adequate cover for the year ahead. |
| Above 2 | Comfortable cover, though very high can mean idle cash. |
Rough conventions for an ordinary company; sectors differ. A range is not a buy or sell level.
Current assets against current liabilities. Below 1 means the next year's bills are larger than the assets that should pay them. The quick / acid-test skips inventory.
What the company can convert to cash within a year, against what it owes within a year.
It answers the plainest question about a business: can it pay its bills over the next twelve months.
No. Current ratio describes one aspect of a company, a price or a contract, and it is best read alongside other numbers and the business itself. Jivani Markets is a research and education platform; it does not give buy, sell or hold recommendations.