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| Current Assets to Total Debt |
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Total Current Assets
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| Current Assets to Total Debt =
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Short-Term Debt + Long-Term Debt
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Explanation of Current Assets to Total Debt:
The Current Assets to Total Debt ratio measures the company's
ability to cover its total debt with its current assets. This ratio is
also used to estimate the liquidity of the company by showing the company can
pay its creditors with its current assets if the company's assets ever had
to be liquidated.
Importance of Current Assets to Total Debt:
An increasing Current Assets to Total Debt ratio is generally a
positive sign, showing the company has a better ability to satisfy its
debt obligations using its current assets. A ratio of 1.0 or greater
indicates the company would just meet its debt obligations, when in reality the
company would need a ratio result that is higher than this, as some of the
current assets could not easily be converted into cash.
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