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Current Ratio

Provided by the International Finance Corporation


This ratio measures the ability of the business to pay off all short-term debts and borrowings using the value of current assets (stocks or inventories, cash, and short term loans). It is reasonable to assume that a healthy business will usually be in a position to meet its short-term debts and borrowings comfortably.

A ratio of greater than 1.25:1 would be acceptable, although a figure of at least 1.50:1 would be preferable to provide a safety margin especially if the value of stocks is high (as these might be a little more difficult to turn into cash quickly).

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The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law.  IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or  liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon.

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