Current Ratio

A measure of liquidity. This measure compares the totals of the current assets and current liabilities. The higher the current ratio, the greater the ‘cushion’ between current obligations and the business’s ability to pay them. Generally, a current ratio of 2 or more is an indicator of good short-term financial strength. In other words, the current assets of the business should be at least double the current liabilities. For this period, the current ratio was 0.5:1, up from 0.48:1 last period and below the minimum target of 2:1.

The Current Ratio is less than the alert level of 1:1. The child care business may have problems meeting its short-term obligations.