Current Ratio
CONDITION
| Year : | 2006 |
| Your ratio : | 0.83 |
| Industry Avg : | 0.77 |
| Current Assets : | $84,543 |
| Current Liabilities : | $102,096 |
GRAPH
Current Ratio
Is the company spending too much or is it holding too much cash back? Normal current ratio standards call for a measure of 1.5-2.0 to be safe.Some industries vary substantially from this, typically on the low side. If your company is one of those,and is below industry standards, your attention is warrented.Many small buisness are operated as sole proprietorship, partnership, or sub-S corporation. As a result, there is a tendency to not leave any more cash in the business than absolutely necessary.When banking relationship are required for growth, the bank will normally ask for guarantees from outside the business, placing a responsibility on the owner and family assets.
The current ratio is the standard measure of any business' financial health. It will tell you whether your business is able to meet its current obligations by measuring if it has the assets to cover its liablities. The standard current ratio for a healthy business is 2.0 or better, meaning it has twice as many current assets as current liabilities. However ,the composition and quality of current assets is a critical factor in the analysis of an individual firm's liquidity.
Your perfomance on this ratio demonstrates a better than average ability to pay obligations that will be due within the next twelve months. Make sure that all of yours liabilities are included, especially those long term obligations that make come due within the next year