1) How is the current ratio calculated? 2) How does a classified balance sheet help this calculation? 3) How is it used to evaluate a company? 4) Give an example of a good current ratio and a bad current ratio. Solution 1. Current ratio = Current assets ÷ Current liabilities 2. A classified balance sheet will have 4 sections, current assets, noncurrent assets, current liabilities and noncurrent liabilities. It is easier to obtain the values of current assets and current liabilities from this balance sheet. 3. It is used to evaluate the liquidity of the company and represents company’s ability to pay current liabilities. 4. If the current ratio is more than 1, company has enough liquidity and vice-versa. Current assets = 15 million and current liabilities = 10 million Good current ratio = 1.5 Current assets = 15 million and current liabilities = 30 million Bad current ratio = 0.5 .