Current Ratio Formula:
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| Formula for Calculation of Current Ratio |
Meaning:
Current Ratio is the ratio or proportion
between current assets and current liabilities. Current assets mean assets that
can be expected to get converted into cash within a year and current
liabilities are those that mature within 12 months. It is a measure of the
business’s liquidity or the ability to meet short-term obligations.
Desirable Number:
Current ratio of two is minimum
stipulated. Any number above means additional safety. A number below 2
indicates weakness.
Example:
Here we present the example of calculating the current ratio of NMDC Ltd., as per the balance sheet on 31st March 2015.
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| Example Showing Current Ratio Calculation of NMDC Ltd. |
