Running out of cash can be a frightening experience. It is one thing when you are in a restaurant, and you left your wallet at home.
Finding financial happiness is more than just making money. To achieve your short-term and longer-term financial goals, you need to know and understand your financial position.
When measuring your current ratio, your focus is on existing assets. You can convert into cash within a year and current liabilities due within the year.
Investors use the current formula to search for companies with strong balance sheets to weather economic downturns.
A current ratio measures the household’s ability to liquidate those assets to meet their short-term obligations without additional borrowing.
Don’t rely on your investments as current assets if you have a long term perspective.