Current Liability Coverage Ratio Calculator: Assess Your Company’s Financial Health
The current-liability-coverage ratio tells you how many dollars of operating cash back every dollar of average current liabilities. Public U.S. companies posted a 1.4 median ratio in 2022 (S&P Global Market Intelligence, 2023). A figure above 1 signals enough internally generated cash to settle near-term debts.
Current Liability Coverage Ratio Calculator
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How to use the tool
Enter Net Cash from Operating Activities: Type the figure from your latest cash-flow statement, e.g., 250 000 or 78 000.
Enter Total Current Liabilities: Use the sum of all obligations due within 12 months, e.g., 500 000 or 195 000.
Enter Number of Liabilities: Count each distinct current liability, e.g., 8 or 5.
Press “Calculate”: The script divides total liabilities by the count to find the average, then divides net cash by that average to output your ratio.
Formulas the calculator uses
$$
\text{Average Current Liabilities}= rac{\text{Total Current Liabilities}}{\text{Number of Liabilities}}
$$
$$
\text{Current Liability Coverage Ratio}= rac{\text{Net Cash from Operating Activities}}{\text{Average Current Liabilities}}
$$
At 2.00, you still generate twice the cash needed, indicating strong coverage.
Quick-Facts
Median S&P 500 ratio: 1.4 × (S&P Global Market Intelligence, 2023).
Target threshold ≥ 1.0 per CFA liquidity guidance (CFA Institute, 2022).
Net cash defined under GAAP Statement of Cash Flows ASC 230 (FASB, 2021).
SEC Rule 13a-13 mandates quarterly disclosure for U.S. issuers (SEC, 2021).
FAQ
What does the calculator measure?
It shows how many dollars of operating cash cover each dollar of average current liabilities, spotlighting near-term solvency (Investopedia, https://www.investopedia.com).
How do I compute average current liabilities?
Sum all current liabilities and divide by the number of separate obligations; the tool automates this step, preventing manual error (KPMG “Guide to Financial Statement Presentation,” 2023).
What is a healthy ratio?
Values above 1 indicate adequate cash generation; manufacturers average 1.3, while utilities average 0.9 (Moody’s sector medians 2022).
Why not rely on the current ratio instead?
The current ratio counts inventory and receivables that may not be quickly liquid, whereas this metric focuses solely on cash coming from operations (PwC, “Cash Flow Fundamentals,” 2022).
How frequently should I run the calculation?
Quarterly aligns with SEC filings, enabling trend spotting before annual reports (SEC Form 10-Q instructions, 2021).
Can a very high ratio be bad?
Excessive liquidity may signal under-investment; “idle cash erodes return on equity” (McKinsey & Company, Global Capital Survey 2022).
How can I raise a low ratio?
Boost operating cash by improving receivable collection, renegotiating supplier terms, or trimming discretionary spending (Harvard Business Review, “Managing Cash Flow,” 2021).
Does the tool work for startups?
Yes, but volatile cash flows can distort single-period results; supplement with cash-burn rate analysis (CB Insights, Startup Financials Report 2023).
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