How is current ratio calculated?

The formula is: Current Ratio = Current Assets / Current Liabilities. The full breakdown is on this page, including a worked example on MSFT.

Why does current ratio matter for value investing?

Current Ratio is a leverage metric documented across Warren Buffett's 50+ years of Berkshire Hathaway shareholder letters and the broader value-investing canon (Graham, Fisher, Lynch, Greenblatt). It feeds into the Buffett-Fit composite score on invest-like - graders apply it consistently across every public stock so you can compare like-for-like.

Where can I see current ratio for a real stock?

Open /buffett/msft/ on invest-like for MSFT's Current Ratio value alongside the rest of the 5-pillar Buffett-Fit verdict. Every public stock in the 12,000-ticker universe has the same field - refresh daily.

How is current ratio different from debt equity?

Current Ratio and debt equity are both leverage metrics - see the linked term for the distinction in mechanics and use. The Buffett-Fit framework on invest-like uses both in the composite score with different pillar weights.

Current Ratio - Definition, Formula + Buffett Example

Current assets divided by current liabilities. Above 1 = company can pay its bills due in the next year. Graham's defensive minimum: 2.

What it is

Current assets (cash, receivables, inventory) divided by current liabilities (payables, short-term debt, taxes due within 12 months). Measures the safety cushion for paying near-term obligations.

Graham's rule

Benjamin Graham (Buffett's teacher) demanded a current ratio of at least 2.0 for defensive investing. The logic: if a recession halved the company's short-term assets, it'd still cover its bills.

What "good" looks like

> 2.0: Graham-defensive, fortress balance sheet
1.5–2.0: solid, the level most quality businesses run at
1.0–1.5: workable, requires healthy cash flow to refinance
< 1.0: working-capital deficit - relies on continuous cash flow to stay solvent. Vulnerable in a credit crunch.

Sector context matters

Retailers (Walmart, Target) often run current ratios below 1.0 - they collect from customers in cash before paying suppliers, so the deficit is structural and benign. Software businesses (Microsoft, Adobe) often run far above 2 - they have minimal short-term obligations.

Current Ratio

What it is

Graham's rule

What "good" looks like

Sector context matters

Related terms

See it on a real stock

Related on invest-like