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Can a healthy liquidity ratio hide a cash problem?

Quick lesson1 min read

The current ratio compares current assets and current liabilities on one date. To pay a bill, it also matters when those assets turn into money.

An example with numbers

You have $100,000 of current assets and $50,000 of current liabilities: the ratio is 2. If $70,000 of the assets is slow-moving inventory and you only have $5,000 in the bank, a $15,000 payment due tomorrow can cause strain.

Try it with your numbers

Sort payments due, expected receipts and inventory availability by date. Read the ratio together with the cash calendar.

Open the calculator

Example figures for learning purposes. They are not a recommendation and do not replace professional advice.

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