The current assets turnover ratio ascertains the efficiency with which current assets are used in a business. This ratio is strongly associated with the efficient utilization of cash, receivables, and inventory. A higher value of this ratio indicates greater circulation of current assets while a low ratio indicates a stagnation of the flow of current assets.
The most widely used measure of liquid position of an enterprise is the current ratio, that is, the ratio of the firm’s current assets to current liabilities.
It is calculated by dividing current assets by current liabilities:
liquid (or) quick ratio is a measurement of a firm’s ability to convert its current assets quickly into cash in order to meet its current liabilities. It is a measure of judging the immediate ability of the firm to pay-off its current obligations.