How do I calculate financial ratios?
An example of an AI chatbot conversation about calculating financial ratios for analysis.
How do I calculate financial ratios?
To calculate financial ratios, you need specific financial data from a company's financial statements. What ratio are you interested in?
I'm interested in the current ratio. How do I calculate that?
The current ratio is calculated by dividing current assets by current liabilities. Do you have the figures for those?
Yes, I have current assets of $150,000 and current liabilities of $100,000.
Great! The current ratio would be 150,000 / 100,000, which equals 1.5. This means the company has $1.50 in assets for every $1 in liabilities.
What does a current ratio of 1.5 indicate?
A current ratio of 1.5 indicates that the company is in a good position to cover its short-term obligations, as it has more current assets than liabilities.
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