Formula
Current ratio = current assets ÷ current liabilities × 100 (%)
With current assets of KRW 150 billion and current liabilities of KRW 100 billion, the current ratio is 150%.
Definition
The current ratio is current assets divided by current liabilities. Current assets are assets that can generally turn into cash within a year, such as cash, deposits, receivables and inventory, and current liabilities are debts due within a year. The current ratio looks at short-term ability to pay, that is, the room to handle debts coming due now.
A current ratio of 100% means debts due soon equal assets that will soon turn into cash. Comfortably above 100% signals room in short-term funding; below 100% signals that short-term funds are tight and the company may need to borrow more or dispose of assets.
Where the debt ratio looks at the total amount of debt, the current ratio focuses on when it falls due. It helps screen out the case of a company that reports a profit yet fails because it lacks the cash for debts falling due right away. Jupick reads it in the financial stability area together with the debt ratio and interest coverage.
How to read it
In general, a current ratio of 100% or more is read as adequate short-term ability to pay, and 150 to 200% or more is commonly called ample. In Jupick's strengths and weaknesses summary, 200% or more is generally labeled “Ample short-term liquidity” and below 100% “Tight short-term liquidity”.
An extremely high current ratio is not always good, though. Holding more cash or inventory than needed can mean those assets are sitting idle instead of producing profit.
A high current ratio driven by large inventory calls for caution. Inventory that is not moving is an asset only on the books and does not turn into cash quickly in practice. In that case the quick ratio, which excludes inventory, gives a more accurate picture.
Current ratio across the market now
The values that fall at each point when the stocks Jupick covers are lined up by Current ratio, smallest to largest. Positions in the line are used instead of an average because a few unusually large values can drag a single average a long way.
KoreaBased on 169 stocks
| Lowest 25% | Middle | Highest 25% |
|---|---|---|
| 105% | 154% | 277% |
Smallest value 36%, largest value 4579%
Of the major Korean stocks, only 169 made it into this table. Left out: 31 stocks whose value is not a measured one.
OverseasBased on 191 stocks
| Lowest 25% | Middle | Highest 25% |
|---|---|---|
| 86% | 111% | 163% |
Smallest value 27%, largest value 791%
Of the major overseas stocks, only 191 made it into this table. Left out: 8 stocks whose value is not a measured one.
Stocks are rarely left out at random. Companies for which a metric does not hold, or for which the source gives no value, tend to be the ones in weaker shape, so the stocks left in the table are the ones in better condition. The middle value of such a table leans to the favorable side compared with the whole market, and the more stocks are left out, the more it leans.
How to read each range
- Lowest 25%
- The quarter with the fewest assets about to turn into cash relative to debts due soon. Stocks below 100%, if any, generally fall here. Distribution and food and beverage businesses, where cash turns over quickly, run without strain even at low values, so the sector is worth checking too.
- Middle half
- Room to pay short-term obligations is in the common range for the market. Whether current assets lean toward cash or toward inventory makes the same value feel different.
- Highest 25%
- The quarter with ample assets to turn into cash relative to debts due soon. The cushion is large, but this band also includes companies that hold more cash or inventory than needed, assets that are not producing profit.
The two values at either end of the table above are the boundaries that split the stocks into three groups. What it means to belong to each group is written above.
Two stocks that fall just either side of a boundary have practically the same value. Being in different groups does not by itself make them different. The boundaries are drawn again from each day’s sample, so a company can change groups even when nothing about it has changed.
Lowest and highest describe the order of size only, not good or bad. The data is updated once a day.
Stocks with a high current ratio now
- 1BROBOTIS4579%
- 2CVoronoi, Inc.1878%
- 3BDONG SUH COMPANIES INC.1767%
- 4BPeptron, Inc.1645%
- 5CRainbow Robotics1266%
Stocks on Jupick's watchlist with a current ratio value, sorted from the highest.
Points to watch
- The quality of current assets matters. A high ratio built on plenty of cash and equivalents is very different from one built on inventory that is not moving or receivables of uncertain collection.
- It is a figure at a single point, the balance sheet date, so funds can be adjusted briefly to make it look better.
- The normal range differs by sector. Distribution and food and beverage businesses, where cash turns over quickly, run well even with a low current ratio, while sectors with long collection periods need a larger cushion.