Free calculator

Current Ratio Formula and Calculator

The current ratio is your current assets divided by your current liabilities. It shows whether you can pay what's due within a year. Use the calculator, or watch Claude or ChatGPT work it out from a set of books.

Work it out here

Current assets Total $865,600
Current liabilities Total $277,000

Example figures from a sample balance sheet. Type over them with your own.

Current ratio 3.12
Quick ratio 2.98
Plenty of cover

You have $3.12 in current assets for every $1 due within a year. That's plenty of cover. Very high ratios can mean cash is sitting idle.

Get your real current ratio from your books Connect QuickBooks, Xero or NetSuite, then ask Claude or ChatGPT.
Ask your own books

The formula: Current assets ÷ Current liabilities

Or ask Claude or ChatGPT

Kipper
Question:

What's our current ratio?

Answer:
  • Asking Kipper for the balance sheet…
  • Adding up current assets…
  • Adding up current liabilities…
  • Dividing one by the other…

3.12. You have $3.12 in current assets for every $1 due within a year. The two totals come from your balance sheet. The ratio is my arithmetic.

Current ratio · August 31 · Xero
Figure
Current assets · from your balance sheet$865,600
Current liabilities · from your balance sheet$277,000
Current ratio · my arithmetic3.12
Question:

How has our current ratio changed over the last six months?

Answer:
  • Kipper is reading six months of balance sheets…
  • Working out the ratio for each month…
  • Lining them up…
  • Checking what moved it…

Up from 2.60 in March to 3.12 now. Cash grew faster than what you owe.

Current ratio · month end · Xero
MonthCurrent ratio
March2.60
June2.80
July2.94
August3.12
Question:

What's in our current assets?

Answer:
  • Asking Kipper for the current assets on your balance sheet…
  • Grouping them by type…
  • Adding them up…

$865,600, and most of it is cash. Money customers owe you is the next biggest.

Current assets · August 31 · Xero
Amount
Cash in the bank$538,200
Owed by customers$286,400
Prepaid and other$41,000
Current assets$865,600
Question:

What's our quick ratio?

Answer:
  • Kipper is reading cash and what customers owe…
  • Leaving out prepaid costs…
  • Dividing by current liabilities…
  • Marking which figure is mine…

2.98. You hold no stock, so it's close to your current ratio. The first two rows come from your books. The last is my arithmetic.

Quick ratio · August 31
Figure
Cash and owed by customers · from your books$824,600
Current liabilities · from your books$277,000
Quick ratio · my arithmetic2.98
Question:

What do we owe within the next year?

Answer:
  • Asking Kipper for the current liabilities on your balance sheet…
  • Grouping them by type…
  • Adding them up…

$277,000. Supplier bills are the biggest part, then payroll, taxes and cards.

Current liabilities · August 31 · Xero
Amount
Bills owed to suppliers$119,300
Payroll, taxes and cards$114,700
Loan due within a year$43,000
Current liabilities$277,000
Reply to Claude…
Open the live demo

A recorded example. Open the interactive demo to ask your own questions.

The formula

How to calculate the current ratio

Three steps, all from your balance sheet.

01

Add up current assets

Cash, money customers owe, stock, and anything else that turns into cash within a year.

02

Add up current liabilities

Supplier bills, loan repayments due within a year, and payroll, taxes and cards owed.

03

Divide assets by liabilities

The answer is how many dollars you hold for every dollar that's due.

Current ratio

Current assets ÷ Current liabilities

The sample business: $865,600 ÷ $277,000 = 3.12.

Quick ratio

(Cash + Receivables) ÷ Current liabilities

The same month: $824,600 ÷ $277,000 = 2.98. It leaves out prepaid costs and stock.

Working capital

Current assets − Current liabilities

$865,600 − $277,000 = $588,600. The same gap, in dollars.

Reading it

What is a good current ratio?

Above 1 means you can cover what's due within a year. Many small businesses aim for 1.5 to 3. What's normal depends on your industry, so compare yourself with businesses like yours.

Below 1

What's due within a year is more than you can turn into cash soon. Watch cash closely.

1 to 1.5

You can cover what's due, with a thin cushion. One slow month could squeeze it.

1.5 to 3

A comfortable range for most small businesses. 2 is a common benchmark.

Above 3

Plenty of cover. Very high ratios can mean cash or stock is sitting idle.

3.12 the sample business

In your books

Find each figure on your balance sheet

Both totals are on one report. Current assets and current liabilities each have their own section.

  • Current assets come first, with cash at the top.
  • Current liabilities sit above your long-term debt.
  • Divide one total by the other. Here, that's $865,600 ÷ $277,000 = 3.12.
Balance sheet · August 31 Sample business
Current assets
Cash in the bank $538,200
Owed by customers $286,400
Prepaid and other $41,000
Total current assets $865,600
Current liabilities
Bills owed to suppliers $119,300
Payroll, taxes and cards $114,700
Loan due within a year $43,000
Total current liabilities $277,000
Current ratio 3.12

Related terms

The current ratio and the terms people mix it up with

Each one measures how easily you can pay what's due soon. Here's what it means and how to work it out.

Current ratio

Current assets compared with current liabilities.

Current assets ÷ current liabilities

Quick ratio

The same, leaving out stock and prepaid costs. Also called the acid-test ratio.

(Cash + receivables) ÷ current liabilities

Cash ratio

The strictest of the three. Cash alone against what's due.

Cash ÷ current liabilities

Working capital

The gap between the two, in dollars.

Current assets − current liabilities

Current assets

Anything that turns into cash within a year.

Cash + receivables + stock + prepaid

Current liabilities

Anything you have to pay within a year.

Bills + short-term debt + accruals

Side by side

A calculator vs asking your books

A calculator works out the figures you type. Here's what changes when Claude or ChatGPT can read your books instead.

Finding the figures
Typing the numbers

Pick each line off your balance sheet by hand.

Connected to your books

Read straight off your balance sheet.

What counts as current
Typing the numbers

Easy to miss a loan payment due this year.

Connected to your books

Each line is listed, so you can check it.

Comparing months
Typing the numbers

Work out each month separately.

Connected to your books

Ask how the ratio has moved since last month.

Next month
Typing the numbers

Find the figures and type them in again.

Connected to your books

Ask the same question. The figures are current.

Trusting the answer
Typing the numbers

It's only as good as what you typed.

Connected to your books

Every figure traces back to your books.

Connect your books and skip the typing

Start free, connect QuickBooks, Xero or NetSuite, and ask for your real current ratio.

Ask your own books See pricing

Both assistants

Use Claude or ChatGPT: Kipper works with both

Your team can use Claude or ChatGPT to work out the current ratio and ask follow-up questions. Either way, the figures come straight from your books. Click a card to see it in the demo.

Kipper
Question:

What's our current ratio?

Answer:
  • Asking Kipper for the balance sheet…
  • Adding up current assets…
  • Adding up current liabilities…
  • Dividing one by the other…

3.12. You have $3.12 in current assets for every $1 due within a year. The two totals come from your balance sheet. The ratio is my arithmetic.

Current ratio · August 31 · Xero
Figure
Current assets · from your balance sheet$865,600
Current liabilities · from your balance sheet$277,000
Current ratio · my arithmetic3.12
Question:

How has our current ratio changed over the last six months?

Answer:
  • Kipper is reading six months of balance sheets…
  • Working out the ratio for each month…
  • Lining them up…
  • Checking what moved it…

Up from 2.60 in March to 3.12 now. Cash grew faster than what you owe.

Current ratio · month end · Xero
MonthCurrent ratio
March2.60
June2.80
July2.94
August3.12
Question:

What's in our current assets?

Answer:
  • Asking Kipper for the current assets on your balance sheet…
  • Grouping them by type…
  • Adding them up…

$865,600, and most of it is cash. Money customers owe you is the next biggest.

Current assets · August 31 · Xero
Amount
Cash in the bank$538,200
Owed by customers$286,400
Prepaid and other$41,000
Current assets$865,600
Question:

What's our quick ratio?

Answer:
  • Kipper is reading cash and what customers owe…
  • Leaving out prepaid costs…
  • Dividing by current liabilities…
  • Marking which figure is mine…

2.98. You hold no stock, so it's close to your current ratio. The first two rows come from your books. The last is my arithmetic.

Quick ratio · August 31
Figure
Cash and owed by customers · from your books$824,600
Current liabilities · from your books$277,000
Quick ratio · my arithmetic2.98
Question:

What do we owe within the next year?

Answer:
  • Asking Kipper for the current liabilities on your balance sheet…
  • Grouping them by type…
  • Adding them up…

$277,000. Supplier bills are the biggest part, then payroll, taxes and cards.

Current liabilities · August 31 · Xero
Amount
Bills owed to suppliers$119,300
Payroll, taxes and cards$114,700
Loan due within a year$43,000
Current liabilities$277,000
Reply to Claude…
Open the live demo

Connect once, then ask from either one

Read-only access to QuickBooks, Xero or NetSuite, with the same permissions behind each.

Schedule a demo

FAQ

Current ratio questions

What people ask about the current ratio, and how to work it out.

It's your current assets divided by your current liabilities. It shows how many dollars you hold for every dollar due within a year.
Current ratio = current assets ÷ current liabilities. Both totals are on your balance sheet.
Add up your current assets, then your current liabilities, and divide the first by the second. In the sample business, $865,600 ÷ $277,000 = 3.12.
Above 1 means you can cover what's due within a year. Many small businesses aim for 1.5 to 3, and 2 is a common benchmark. What's normal depends on your industry.
Up to a point. More cover is safer. But a very high ratio can mean cash or stock is sitting idle, when it could be put to work.
Whether you can pay your short-term bills from your short-term assets, without needing new cash to come in.
No, it's a ratio, written like 3.12 or 3.12:1. If you want a percentage, multiply by 100, so 3.12 is 312%.
The quick ratio leaves out stock and prepaid costs, which take longer to turn into cash. So it's stricter. In the sample, the quick ratio is 2.98 and the current ratio is 3.12.
Find total current assets and total current liabilities. Each has its own section. Divide the first by the second.
Cash, money customers owe you, stock, and prepaid costs. Anything that turns into cash within a year.
Bills you owe suppliers, loan repayments due within a year, and payroll, taxes and credit cards owed.
What you owe within a year is more than you can turn into cash soon. It doesn't always mean trouble, but it's a reason to watch cash closely.
Collect unpaid invoices sooner, hold less stock, or move short-term debt onto a longer loan. Each one changes one side of the ratio.
They use the same two totals. Working capital subtracts them, so it's in dollars. The current ratio divides them. In the sample, working capital is $588,600 and the ratio is 3.12.
Yes, once it can see your books. Connected through Kipper, it reads your balance sheet from QuickBooks, Xero or NetSuite, read-only. Then it does the division and shows its work.
QuickBooks, Xero and NetSuite. Kipper reads the balance sheet from all three.

Get your real current ratio from your books

One read-only connection to QuickBooks, Xero or NetSuite. Then ask Claude or ChatGPT for your current ratio, and how it's moved. We'll help you set it up.

Ask your own books Schedule a demo
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