Difference between revisions of "Current ratio"

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[[Current ratio]] is a liquidity ratio; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.
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[[Current ratio]] is the primary ratio of [[liquidity ratios]]; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.
  
  
 
==Definitions==
 
==Definitions==
 
According to [[College Accounting: A Practical Approach by Slater (13th edition)‎]],
 
According to [[College Accounting: A Practical Approach by Slater (13th edition)‎]],
:[[Current ratio]]. A liquidity ratio; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.
+
:[[Current ratio]]. A [[liquidity ratio]]; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.
 +
According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]],
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:[[Current ratio]]. Indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future; it is found by dividing current assets by current liabilities.
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According to [[Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition)]],
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:[[Current ratio]]s. This ratio is calculated by dividing current assets by current liabilities. It indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future.
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According to [[Managerial Accounting by Braun, Tietz (5th edition)]],
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:[[Current ratio]]. Current assets divided by current liabilities. It measures the ability to pay current liabilities with current assets.
  
 
==Related concepts==
 
==Related concepts==
 
*[[Accounting]] (alternatively known as [[accountancy]]) is management of [[financial data]], information, and knowledge about [[financial transaction]]s of [[legal entity|legal entiti]]es. [[Accountancy]] tends to include [[bookkeeping]] and, depending on a particilar enterprise, may also include [[quatitative analysis]] of [[financial data]] in the [[bookkeeping system]] and/or [[business intelligence]].
 
*[[Accounting]] (alternatively known as [[accountancy]]) is management of [[financial data]], information, and knowledge about [[financial transaction]]s of [[legal entity|legal entiti]]es. [[Accountancy]] tends to include [[bookkeeping]] and, depending on a particilar enterprise, may also include [[quatitative analysis]] of [[financial data]] in the [[bookkeeping system]] and/or [[business intelligence]].
  
==Related coursework==
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==Related lectures==
 
*[[Principles of Accounting]].  
 
*[[Principles of Accounting]].  
  
[[Category: Accounting]][[Category: Articles]]
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[[Category: International Accounting]][[Category: Articles]][[Category: Accounting]]

Latest revision as of 10:56, 27 November 2023

Current ratio is the primary ratio of liquidity ratios; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.


Definitions

According to College Accounting: A Practical Approach by Slater (13th edition)‎,

Current ratio. A liquidity ratio; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.

According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),

Current ratio. Indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future; it is found by dividing current assets by current liabilities.

According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),

Current ratios. This ratio is calculated by dividing current assets by current liabilities. It indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future.

According to Managerial Accounting by Braun, Tietz (5th edition),

Current ratio. Current assets divided by current liabilities. It measures the ability to pay current liabilities with current assets.

Related concepts

Related lectures