The current ratio weighs a company's current assets against its current liabilities. A good current ratio is typically considered to be anywhere between 1.5 and 3.
As a general rule, a current ratio below 1.00 could indicate that a company might struggle to meet its short-term obligations, whereas ratios of above 1.00 might indicate a company is able to pay its current debts as they come due.
The higher the ratio is, the more capable you are of paying off your debts. If your current ratio is low, it means you will have a difficult time paying your immediate debts and liabilities. Generally, a current ratio of 2 or higher is considered good, and anything lower than 2 is a cause for concern.
A good current ratio is considered 1.5 and above, though ratios between 1.2 and 1.5 can still be adequate for businesses in certain industries, such as industrial companies. On the other hand, if a company's ratio is 1.0 or lower, that signals financial distress requiring immediate attention.
As a rule of thumb, a current ratio of 1.5 or higher is considered a sign of adequate liquidity in a company.
For example, a current ratio of 9 or 10 may indicate that your company has problems managing capital allocation and is holding too much cash in its accounts. From a business perspective, that cash would be better spent on investments or growth initiatives.
Apple has a current ratio of 0.87. It indicates that the company may have difficulty meeting its current obligations. Low values, however, do not indicate a critical problem.
To give you some sense of what the average for the market is, though, many value investors would refer to 20 to 25 as the average P/E ratio range. And again, like golf, the lower the P/E ratio a company has, the better an investment the metric is saying it is.
Generally, a good debt ratio for a business is around 1 to 1.5. However, the debt-to-equity ratio can vary significantly based on the business's growth stage and industry sector. For example, newer and expanding companies often utilise debt to drive growth.
Current ratio measures the extent to which current assets if sold would pay off current liabilities. A ratio greater than 1.60 is considered good. A ratio less than 1.10 is considered poor.
What is a good return on equity? While average ratios, as well as those considered “good” and “bad”, can vary substantially from sector to sector, a return on equity ratio of 15% to 20% is usually considered good.
A rate of more than 1 suggests financial well-being for the company. There is no upper end on what is “too much,” as it can be very dependent on the industry, however, a very high current ratio may indicate that a company is leaving excess cash unused rather than investing in growing its business.
A current ratio of 2:1 is considered ideal in many cases. This means that the current assets can cover the current liabilities two times over.
A “good” current ratio differs across industries, but it's generally accepted that a ratio between 1.5 and 3 is healthy. This range suggests that a company has sufficient assets to meet its liabilities without maintaining unnecessary idle resources.
What is a good working capital ratio? A good working capital ratio (remember, there is no difference between current ratio and working capital ratio) is considered to be between 1.5 and 2, and suggests a company is on solid ground.
A good PE (Price to Earnings) ratio in India usually falls between 12 and 20, indicating that a company's stock is neither overvalued nor undervalued. This range balances risk and growth potential, making it ideal for Indian stock market investment.
According to Tesla's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 115.76. At the end of 2022 the company had a P/E ratio of 30.6.
Apple (AAPL) PE Ratio (TTM) : 38.55 (As of Jan. 14, 2025)
Tesla has a current ratio of 1.84.
Alphabet(Google) has a current ratio of 1.95. It generally indicates good short-term financial strength. During the past 13 years, Alphabet(Google)'s highest Current Ratio was 7.13. The lowest was 1.95.
Microsoft has a current ratio of 1.30. It generally indicates good short-term financial strength. During the past 13 years, Microsoft's highest Current Ratio was 3.40. The lowest was 1.22.
What is a good current ratio? "Banks like to see a current ratio of more than 1 to 1, perhaps 1.2 to 1 or slightly higher is generally considered acceptable," explains Trevor Fillo, Senior Account Manager with BDC in Edmonton, Alberta. "A current ratio of 1.2 to 1 or higher generally provides a cushion.
The ideal debt to equity ratio is 2:1. This means that at no given point of time should the debt be more than twice the equity because it becomes riskier to pay back and hence there is a fear of bankruptcy.