What is considered a normal current ratio range?

The normal current ratio range typically indicates a company's ability to meet its short-term liabilities using its short-term assets. A current ratio of 1.50 to 3.00 signifies that for every dollar of current liabilities, a company has between $1.50 and $3.00 in current assets. This range suggests a healthy liquidity position, where the company is better equipped to cover its obligations without facing cash flow issues.

A current ratio below 1.50 might indicate that a company could struggle with liquidity, as it would not have sufficient current assets to cover its current liabilities entirely. Conversely, a current ratio above 3.00 might suggest that the company is not utilizing its current assets effectively, potentially indicating inefficiency in asset management.

The selected range of 1.50 to 3.00, therefore, reflects a balance where the company is likely stable and has a solid cushion to handle its short-term financial commitments while also not excessively tying up resources in current assets.