Current ratio2.00
- Numerator
- Current assets
- Denominator
- Current liabilities
- Basis
- Same balance-sheet date
Show the math
current-ratio = 250000 / 125000 = 2
Definition table
| Model | Numerator | Denominator | Question it can support |
|---|---|---|---|
| Current ratio | Current assets | Current liabilities | How much stated short-term asset coverage exists at one date? |
| Debt to equity | Explicitly defined debt | Shareholders’ equity | How does the chosen debt definition compare with book equity? |
| Operating margin | Operating income | Revenue | What share of revenue remains after operating expenses under the stated accounting basis? |
| ROI | Gain minus cost | Cost | How large is the modeled gain relative to its stated cost? |
| CAGR | Ending divided by beginning value | Years as an exponent | What constant annual rate connects two positive endpoints? |
Do not let the label choose the inputs
Debt can mean total liabilities, interest-bearing debt, net debt or another bounded measure. Return can be accounting income, cash flow or market value change. NYU Stern’s financial definitions illustrates why the basis and rationale must accompany a ratio. Industry context and accounting policy can change what a comparison means.
Zero is not a rounding problem. A zero denominator produces an undefined state. A negative denominator stays visible and requires interpretation rather than silent coercion.