Current Ratio Calculator

The current ratio tells us if a company can pay its short-term bills using the money and things it owns that can be quickly turned into cash.

Include cash, inventory, receivables and other assets expected within 12 months.
Include short-term loans, payables and obligations due within 12 months.

What Is Current Ratio?

The Current Ratio is a liquidity metric that measures a company’s ability to pay off its short-term liabilities with its short-term assets.
It indicates how efficiently a business manages working capital and maintains financial stability.

Formula:

Current Ratio = Current Assets ÷ Current Liabilities

Example:

If your business has ₹6,00,000 in current assets and ₹3,00,000 in current liabilities:
Current Ratio = 6,00,000 ÷ 3,00,000 = 2.0
That means your business has ₹2 in assets for every ₹1 in liabilities, which shows good liquidity.

Ideal Current Ratio for Bank Loan

According to international financial standards, a healthy Current Ratio is generally:

  • ✅ 1.5 – 3.0 → Good financial health
  • ⚠️ 1.0 – 1.4 → Caution: Monitor liquidity closely
  • ❌ Below 1.0 → May indicate liquidity issues

Note: Ideal ratios vary by industry — capital-intensive sectors may operate comfortably at lower ratios.

Why Is Current Ratio Important for Bank Loan?

  • Evaluates liquidity position and short-term solvency
  • Helps lenders and investors assess creditworthiness
  • Aids management in working capital planning
  • Useful in financial statement analysis and bank loan assessments

How to Use hellobanker Current Ratio Calculator

  1. Enter your current assets (cash, receivables, inventory, etc.)
  2. Enter your current liabilities (short-term loans, payables, etc.)
  3. Click “Calculate”
  4. Instantly view your Current Ratio and interpretation (good, average, or weak liquidity)

Frequently Asked Questions (FAQs)

1. What is a good current ratio?
A ratio between 1.5 and 3.0 is considered healthy, showing that a business has sufficient short-term assets to meet liabilities.

2. Can the current ratio be too high?
Yes. A very high ratio (above 3.0) may indicate inefficient use of assets or too much idle cash.

3. Is the current ratio the same as liquidity ratio?
The current ratio is a type of liquidity ratio. Other liquidity ratios include Quick Ratio and Cash Ratio.

4. How often should businesses check their current ratio?
It’s recommended to calculate it quarterly or yearly, alongside other financial ratios like Debt-to-Equity and DSCR.