The current ratio is (current assets divided by current liabilities), and businesses want to maintain a current ratio of 1 or more. These are some of the most common liquidity ratios: Current ratio Here are some important liquidity ratios that many managers use to perform financial analysis. If you’re paying $50,000 in principal and interest on a five-year loan within the next 12 months, this current portion of long-term debt is a current liability. You can improve inventory management and account receivable collections to reduce these balances.Ĭurrent liabilities include accounts payable and other liabilities that must be paid within a year. The inventory and accounts receivable balances are expected to be converted into cash within a year.
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