Current Ratio

It is a liquidity ratio and measures the ability of the company to pay off its short term obligations with its current assets. It is helpful for the investors and creditors to understand the liquidity position of the company and to find out that how easily the company will be able to pay off its current liabilities. To calculate current ratio, current assets are divided by current liabilities. A current ratio of 2 is considered as ideal. It means that ideally a company should possess double current assets than its current liabilities. Fraser & Ormiston, 2004 gave the opinion that “the available cash resources to satisfy these obligations must come primarily from cash or the conversion to cash of other current assets. The numbers of current assets and current liabilities are extracted from consolidated balance sheets.”

Current Ratio Formula & Calculation 2015 2014
  Current assets/Current liabilities 1.47 1.84
  Current assets $2,560 $2,621
  Current liabilities $1,744 $1,421


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The ratio of the company stood at 1.84 and 1.47 for the year 2014 and 2015 respectively. It indicates that the efficiency of the company has declined during the year 2015. The primary reason for the decline in the ratio is that the investments of the company have decreased by $176 million due to which the current assets have decreased. The consolidated balance sheets are on the page no. 52 and 53 of the annual report for the year 2015 and 2014 respectively.