The current ratio, also referred to as the coverage ratio, is used to determine how an entity will react to rapid market changes. It is calculated based on the balance sheet data for the reporting period. The analysis is carried out by comparison with the indicators of previous periods.
It is necessary
- - balance sheet;
- - calculator.
Instructions
Step 1
Determine the amount of the company's funds that are on the current account and in the cash desk, as well as the value of securities, inventories and the amount of receivables. Sum these values and divide by the total amount of accounts payable, loans and credits of the company. The resulting value is the current liquidity ratio. To calculate it, you must first fill out the balance sheet in the form No. 1.
Step 2
Find the amount of the company's current assets, which is necessary to calculate the current liquidity ratio. This value is determined on the basis of sections 1 and 2 of the balance sheet. Take the value of line 290 "Current assets" and subtract from it the figures from lines 220 "Contributions owed by founders" and 230 "Long-term receivables". If the last two values are absent, then the current assets of the enterprise are equal to the total for section 2 of the balance sheet.
Step 3
Calculate the company's current short-term liabilities. To do this, it is necessary to completely fill in section 5 "Short-term liabilities" of the balance sheet and determine the total for it. Take the value of line 690 and subtract from it the value of lines 650 "Provisions for future expenses" and 640 "Deferred income".
Step 4
Calculate the ratio of current assets to current short-term liabilities to determine the current liquidity ratio. Analyze the resulting value to characterize the liquidity of the state of the enterprise. The higher the coverage ratio, the better the company's solvency. The optimal value of this indicator is a value in the range from 1 to 3. If the coefficient is higher than 3, it is possible that the company is using capital irrationally. If it is below 1, then this indicates a high financial risk.
