Ratio analysis 2: liquidity, working capital, and long-term financial stability
. The current ratio divides current liabilities by current assets.

. The current ratio tells users of financial statements how many £s of current assets there are per £ of current liabilities.

. The current ratio is just a snapshot of current assets and current liabilities at the year end and ignores the timing of both future inflows of cash and the payment of current liabilities.

. When using the current ratio in the evaluation of an entity's liquidity, it is realistic to assume that all current liabilities of the entity will be payable on the day following the statement of financial position date.