What Is Current Ratio And Why Does It Matter?

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

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

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

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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.

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

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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.

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

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FOR MORE ABOUT THIS POST, VISIT RADICAL FIRE

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