What is the ideal result for the current ratio?

The ideal result for the current ratio being equal to or greater than 1.0 indicates that a company has sufficient current assets to cover its current liabilities. In practical terms, a current ratio of 1.0 suggests that a firm has the same amount of current assets as it does current liabilities, which is a financially stable position. It signifies that the company is in a position to meet its short-term obligations as they come due.

A current ratio significantly below 1.0 could raise concerns among creditors and investors about a company's liquidity risk and its ability to manage short-term commitments. Conversely, a current ratio that is excessively high, such as greater than 5.0 or exactly 2.0, may suggest that a company is not efficiently utilizing its assets to generate revenues, although such ratios can indicate strong liquidity. However, for most businesses, achieving a current ratio of 1.0 or higher is generally viewed as a positive indicator of financial health.