Fun Current Ratio Analysis

The current ratio also known as the working capital ratio measures the capability of a business to meet its short-term obligations that are due within a year.

Current ratio analysis. American Airlines Group current ratio for the three months ending March 31 2021 was 104. Interpretation of Current Ratios If Current Assets Current Liabilities then Ratio is greater than 10. If for a company current assets are 200 million and current liability is 100 million then the ratio will be 200100 20.

A ratio greater than 1 means that the company has sufficient current assets to pay off short-term liabilities. Compare AAL With Other Stocks. The ratio considers the weight of total current assets versus total current liabilities.

The current ratio shows how many times over the firm can pay its current debt obligations based on its assets. The current ratio is calculated simply by dividing current assets by current liabilities. Current ratio is equal to total current assets divided by total current liabilities.

How the Current Ratio Works Lets say a business has 150000 in current assets and 10000 in current liabilities. The current ratio is a very common financial ratio to measure liquidity. In other words it lets people know if the business has the resources to pay their debts over the next 12 months.

The ratio analysis uses the financial statements such as the income statement and the statement of financial position. The first step in liquidity analysis is to calculate the companys current ratio. Current usually means a short time period of less than twelve months.

While there are many asset types youll only include current assets in your. It tells investors and analysts whether a company is able to pay its current liabilities with its current assets typically within a 12-month period. What is Current Ratio Analysis.