How Can a Company Improve Its Current Ratio?

• Delaying any capital purchases that would require any cash payments.
• Looking to see if any term loans can be re-amortized.
• Reducing the personal draw on the business.
• Selling any capital assets that are not generating a return to the business (use cash to reduce current debt).

Is it good for a company to have a high current ratio?

If your current ratio is low, it means you will have a difficult time paying your immediate debts and liabilities. In general, a current ratio of 1 or higher is considered good, and anything lower than 1 is a cause for concern.

Why might a company want to avoid having its current ratio be too low too high?

A low current ratio can often be supported by a strong operating cash flow. If the current ratio is too high (much more than 2), then the company may not be using its current assets or its short-term financing facilities efficiently. This may also indicate problems in working capital management.