What is a good current ratio for liquidity?
John Johnson
Updated on February 12, 2026
A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts. A current ratio below 1 means that the company doesn’t have enough liquid assets to cover its short-term liabilities.
What is the industry average for liquidity ratio?
All Industries: average industry financial ratios for U.S. listed companies
| Financial ratio | Year | |
|---|---|---|
| 2020 | 2019 | |
| Liquidity Ratios | ||
| Current Ratio | 1.94 | 1.69 |
| Quick Ratio | 1.25 | 1.08 |
What is a good current ratio by industry?
Acceptable current ratios vary from industry to industry and are generally between 1.5% and 3% for healthy businesses. If a company’s current ratio is in this range, then it generally indicates good short-term financial strength.
Is a current ratio of 1.5 good?
It’s used globally as a way to measure the overall financial health of a company. While the range of acceptable current ratios varies depending on the specific industry type, a ratio between 1.5 and 3 is generally considered healthy.
Is 4 a good current ratio?
So a current ratio of 4 would mean that the company has 4 times more current assets than current liabilities. A higher current ratio is always more favorable than a lower current ratio because it shows the company can more easily make current debt payments. In other words, the company is losing money.
What do you need to know about the liquidity ratio?
What is a Liquidity Ratio? A liquidity ratio is a type of financial ratio used to determine a company’s ability to pay its short-term debt obligations. The metric helps determine if a company can use its current, or liquid, assets to cover its current liabilities
What is the current ratio of a company?
Current Ratio – breakdown by industry The current ratio indicates a company’s ability to meet short-term debt obligations. Calculation: Current Assets / Current Liabilities. More about current ratio.
What is the Statutory Liquidity Ratio in India?
SLR is known as the statutory liquidity ratio. It is the minimum percentage of the deposit that a commercial bank needs to maintain in the form of cash, securities and gold before offering credit to customers. Current SLR is 21.50% in India.
What should be the ratio of current liabilities to current assets?
A ratio of less than 1 (e.g., 0.75) would imply that a company is not able to satisfy its current liabilities. A ratio greater than 1 (e.g., 2.0) would imply that a company is able to satisfy its current bills.
