Current ratio explained

[@TheFinanceStoryteller]

Enjoyed the video? Then subscribe to the channel, and watch my video on financial ratio analysis next: kzbin.info/www/bejne/g4XUaHurq9R6mc0

[@chitrao111]

Done

[@konstancyja82]

As usually very clear explanation, thank you for sharing it. I feel the learning was never so easy before...

[@TheFinanceStoryteller]

Thank you for watching!

[@konstancyja82]

@@TheFinanceStoryteller and love the voting!

[@Parkerhiggs]

Can someone explain unearned rev. please?

[@TheFinanceStoryteller]

Hello Parker! I have a short video on unearned revenue (also called deferred revenue) for you: kzbin.info/www/bejne/iX_KpoyvgNekgpY

[@rznvideoproductions7534]

What website or app did you use to get the information

[@TheFinanceStoryteller]

In most cases, the annual report published on the investor relations sections of the company's website, and/or the 10-K filing by the company with the SEC.

[@madushanilmani5211]

Can give solution for increase current ratio

[@TheFinanceStoryteller]

One example is to generate more cash from operating activities, and not pay it out a dividends to shareholders.

[@MikeLikeThat]

Fantastic video! I Just subscribed! Keep making more! thank you

[@TheFinanceStoryteller]

Happy to hear that! Yes, planning to make a lot more content...

[@katrulez1000]

Thanks so much, very helpful

[@TheFinanceStoryteller]

You're welcome, Kay! Thanks for watching.

[@jekyllhiding]

Thank you so much, this has helped me a lot.

[@TheFinanceStoryteller]

Glad it helped! I have some related videos on current assets and current liabilities kzbin.info/www/bejne/gKiXhZSfhZllhpY plus solvency and liquidity kzbin.info/www/bejne/sGXdo4RpqMaAqas that might be useful for you too!

[@fanglingnewman4333]

Love your videos. Thanks for posting. better than my professor

[@TheFinanceStoryteller]

Wow, thanks! Enjoy the videos, and please tell your fellow students about them. 😎

[@leamaebenaires3838]

hi sir, mayy I ask what's the difference between the current ratio and acid-test ratio?

[@TheFinanceStoryteller]

The acid-test ratio compares a company's “quick assets” (cash and accounts receivable) to its current liabilities. The difference with the current ratio is that it excludes inventory (which might take some effort and time to convert to cash).

[@leamaebenaires3838]

Thank you very much sir :))))

[@eng25]

Great video! thank you so much

[@TheFinanceStoryteller]

Nice to hear that! Thank you for watching and commenting. :-)

[@john8909]

Great video!!!!

[@TheFinanceStoryteller]

Thank you, John!!!

[@ohyea3464]

So does this basically mean if you have a current ratio of 1 your breaking even. CR of 2 you have 50% more money after paying bills and .5 your behind on bills ?

[@TheFinanceStoryteller]

It would put it slightly differently. The current ratio is a balance sheet ratio, so you are looking at the situation at a specific point in time (specific date), not taking into account the transactions that are likely to happen after it (generating new sales to customers, incurring new expenses, etc.). If on the balance sheet date, the current ratio is 1, then cash and other assets that are expected to be converted to cash within a year are equal to amounts due to be paid to creditors within twelve months. If the current ratio is 2, there is $2 owned for every $1 owed. If the current ratio is .5, then there is $0.50 for every $1 owed. You are not necessarily behind on your bills (all the invoices in accounts payable could be current, i.e. not past due), but the ability to pay what you owe when those invoices become due is low based on what you own. Suppliers and banks will be more careful doing business with a company that has a current ratio of 0.5 than with a company having a current ratio of 2.0.

[@escobar8617]

Thanks dawg you a real one 👌

[@TheFinanceStoryteller]

You're welcome. Thank you for watching and commenting!

[@bulamoves2987]

Well explained

[@TheFinanceStoryteller]

Thank you very much! I think you will like my "financial ratio analysis" video as well: kzbin.info/www/bejne/g4XUaHurq9R6mc0

[@chitrao111]

Nice explanation

[@TheFinanceStoryteller]

Thank you, Ajit!

[@JaspreetKaur-c3x]

1. Based on the figures below, what is the current ratio? £ Inventory 6,000 Trade Payables 12,000 Trade Receivables 11,000 Long term borrowings (Non-current liabilities) 16,000 Current portion of long-term loans 3,000 Taxation payable (within one year) 5,000 Cash 1,000 A) 0.50:1 B) 0.60:1 C) 0.75:1 D) 0.90:1 Please help me to solve this questio .

[@TheFinanceStoryteller]

Current ratio is current assets divided by current liabilities. You can learn in the examples in my video which items go into current assets, and which ones into current liabilities. Group the relevant items, and make the calculation.

[@JaspreetKaur-c3x]

@@TheFinanceStoryteller i cannot make .so thats why i am requesting youbto please solve this . I am cery weak in accounting.If u can solve this then i am able to solve other sums like this.

[@TheFinanceStoryteller]

I will meet you halfway.... Below is how you should classify the various accounts, then you can follow the instructions in my previous comment to finish the calculation. Inventory - Current Assets Trade Payables - Current Liabilities Trade Receivables - Current Assets Long term borrowings (Non-current liabilities) - Out of scope, as this is in Non-current liabilities Current portion of long-term loans - Current Liabilities Taxation payable (within one year) - Current Liabilities Cash - Current Assets

[@yinyin7614]

Like your teaching. Very practical.

[@TheFinanceStoryteller]

Yeah, let's keep it close to the real world! 😉

[@anasulbarihungrybalok6232]

Yesi...

[@ciceroaraujo5183]

Amazing teacher

[@TheFinanceStoryteller]

Thank you for the kind words, Cicero!

[@aidadz6071]

what about the amount restated ?Which one do we need to choose ?Restated Or Current amount?

[@TheFinanceStoryteller]

Hi Aida! Not sure what you are referring to. I don't think any restated amounts are showing in this video?

[@rupeshn6966]

bro vere level explanation

[@TheFinanceStoryteller]

Glad you liked it