Current Ratio

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Current Ratio

Explanation: The current ratio is a financial metric used to assess a company’s short-term liquidity and ability to meet its immediate financial obligations. It measures the company’s ability to pay off its current liabilities using its current assets. A higher current ratio indicates a stronger liquidity position, as the company has more current assets available to cover its current liabilities.

Example: TCS had a current ratio of 2.53 as of FY23. This means that for every rupee of current liabilities, TCS had 2.53 rupees of current assets available to cover those liabilities. In other words, TCS had more than twice as many current assets as current liabilities. A current ratio above 1 indicates that the company has sufficient short-term assets to meet its short-term obligations. A current ratio of 2.53 suggests that TCS is in a comfortable position to pay off its short-term debts as they come due, which is a positive indicator of financial health and liquidity.

You can view the Current Ratios for any company on Radar under the Solvency Ratios in the Ratios section.

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