Current Ratio
Calculate the current ratio, a liquidity ratio that measures a company’s ability to pay off its short-term liabilities with its current assets.
The current ratio is calculated by dividing a company’s current assets by its current liabilities. It indicates whether a company can meet its short-term obligations using its short-term assets.
The formula is as follows:
\[\text{Current Ratio} = \text{Current Assets} / \text{Current Liabilities}\]A current ratio above 1 is the textbook comfort level, but the right level depends on the business: companies that collect from customers before paying suppliers, such as large retailers and restaurant chains, run below 1 without strain, while manufacturers with long production cycles need more. Lenders read it together with the quick ratio (get_quick_ratio), since inventory can be hard to sell at book value, and with the trend, since the year-end balance sheet can be managed to look better than the average day.
Also known as: short-term liquidity, working capital ratio.
Current Ratio in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_current_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["PFE", "MRK", "BMY"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_current_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
How did the current ratios of Pfizer, Merck and Bristol-Myers Squibb develop from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| BMY | 1.521 | 1.2459 | 1.4271 | 1.2526 | 1.2551 |
| MRK | 1.2678 | 1.4737 | 1.252 | 1.3646 | 1.5362 |
| PFE | 1.3989 | 1.2165 | 0.9067 | 1.1713 | 1.1599 |
Parameters
get_current_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over, with balance sheet items averaged over the same number of period ends. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows (per quarter and not annualized with quarterly data). | 4 |