Current Ratio
Current Ratio = Current Assets Current Liabilities
• The current ratio measures the ability of the firm to meet its short-term (less than one year) current liabilities with the conversion of current assets (including accounts receivable, work in process, and cash). It is the measure of the firm’s liquidity. — the higher it is, the greater the ability of the firm to meets its obligations and withstand a decline in revenue (and future cash flow)
Fast Growth Firm Median
Very High Profit Firm Median
2017 2018 2019 2020 2021
Survey Median
2.64 2.59 3.12
2.13 2.83 2.51 2.45 2.64
105
THE PRINCIPALS ACADEMY 2022
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