What Is Current Ratio And Why Does It Matter?


By exercising financial discipline, you  can avoid some  everyday stresses.

Having a large emergency fund when unforeseen events happen can soften the blow of sudden but necessary expenses.

The current ratio is sometimes referred to as the working capital ratio.

Similarly, a family household can use the ratio to know whether they can rely on having enough short-term assets readily available to pay your  short-term debts.

To calculate your current ratio, you divide total current assets by total current liabilities.

To improve your current asset position relative to liabilities, evaluate your spending patterns. Overspending or impulse buying can lead us to buy things we can’t afford or need.

Using financial benchmarks, notably the current ratio,  are useful as a starting point to understanding your financial health.