Current Ratio (Part 5 of 33 | Financial Ratio Analysis Tutorials) [Video]

This tutorial provides a comprehensive overview of the current ratio, which is a type of liquidity ratio. In this tutorial, we will learn how to calculate this ratio using a practical example. More importantly, using the Colgate Case Study, we’ll learn how to interpret the current ratio.

Download the Colgate Excel Model Ratio Analysis Template: We will use an excel template for the analysis. You can download the ratio analysis template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/

What is Current Ratio?
——————————————–
The current ratio is a liquidity ratio that assesses a company’s ability to repay short-term loans with maturities within a year.

Formula
——————————————–
Current Ratio Formula = Current Assets / Current Liabilities.

Interpretation of Current Ratio
——————————————–
– If Current Assets is greater than Current Liabilities (Ratio is greater than 1.0) – this indicates a desirable situation, i.e., the company has enough to meet its short-term obligations.
– If Current Assets = Current Liabilities (Ratio is equal to 1.0) – this indicates that the Current Assets are just enough to cover short term obligations.
– If Current Assets is less than Current Liabilities (Ratio is less than 1.0) – this indicates that the company does not have enough to meet its short-term obligations.

Links to Step by Step Financial Ratios Tutorials
——————————————–
– Part 1 – Ratio Analysis:
https://www.youtube.com/watch?v=yPUb6PsVvLA&list=PLazLoBfxFADN9Qq8j8hghG9nvVBXl1V0y
– Part 2 – Vertical Analysis:
https://www.youtube.com/watch?v=7CX4F2Adubs
– Part 3 – Horizontal Analysis:
https://www.youtube.com/watch?v=4iOpN1zI0ag
– Part 4 – Trend Analysis:
https://www.youtube.com/watch?v=VLHrsLp0Jj8
What you need to do?
——————————————–
Step 1: Download the Colgate Excel Model Ratio Analysis Template. This template will be used for the analysis. You can download the ratio analysis template from this link – https://www.wallstreetmojo.com/ratio-analysis/
Step 2: Please note that we are providing you with downloadable and preformatted Excel spreadsheets to assist you in understanding and applying the concepts. You will receive two templates: 1) Unsolved Colgate Model 2) Completed Colgate Model
Step 3: Start by using the “Unsolved Colgate Model Template” for analysis by following the instructions step by step.
Step 4: Good Luck! 🙂
——————————————–

To know more about Current Ratio, you can go to this link:
https://www.wallstreetmojo.com/current-ratio/

Connect with us!
Youtube ► https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUw?sub_confirmation=1
LinkedIn ► https://www.linkedin.com/company/wallstreetmojo/mycompany/
Facebook ► https://www.facebook.com/wallstreetmojo
Instagram ► https://www.instagram.com/wallstreetmojoofficial/
Twitter ► https://twitter.com/wallstreetmojo