When calculating current ratio does owners capital count as liabilities?
No, the current ratio never involves stockholders’ equity or owners’ equity. The current ratio is always current assets divided by current liabilities. It is a measure of the company’s ability to pay current debts (i.e., those payable within 1 year or less). A current ratio of about 2:1 is considered favorable, but some companies can successfully operate with lower current ratios. If a company has zero liabilities, and is otherwise operating successfully, then it clearly has sufficient liquidity to fund ongoing debt that arises.
