What Is Current Ratio And Why Does It Matter?

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.

What Is The Current Ratio?

Investors use the current formula to search for companies with strong balance sheets to weather economic downturns.

Who Evaluates Your Current Ratio

A current ratio measures the household’s ability to liquidate those assets to meet their short-term obligations without additional borrowing.

Not All Assets Are Equal

Don’t rely on your investments as current assets if you have a long term perspective.

Use Caution When Determining Your Current Assets